UNITED STATES – Paramount Skydance’s plan to sell more than US$44 billion (S$56 billion) of bonds in US dollars and euros to fund its acquisition of Warner Bros Discovery is now in motion, kicking off the main portion of the year’s largest M&A financing.
Bank of America and Citigroup is holding investor calls on Sept 28 to discuss the sale of about US$32 billion (S$40 billion) of investment-grade debt and US$12.4 billion (S$15.8 billion)-equivalent of junk bonds, according to people familiar with the matter. The transaction is part of a US$52 billion (S$66 billion) financing package that also includes US$7.5 billion (S$9.5 billion) in loans, which lenders began marketing last week.
Paramount is aiming to sell eight tranches of US dollar-denominated high-grade bonds, with maturities ranging from two to 40 years, the people said, asking not to be identified because they are not authorised to speak publicly.
For the junk-bond deal, the company is marketing a two-part euro-denominated tranche, with maturities in five and eight years, and three tranches of US dollar notes, due in five, eight and 10 years. Price talk on the 10-year US dollar notes are for a yield in the low 9% area, they added.
The offering comes as Treasury yields have surged to new multi-decade highs, with the stalemate between the US and Iran boosting oil prices and dragging down stocks and bonds on concerns that elevated energy costs could fuel inflation and prompt further Federal Reserve rate hikes. On Sept 28, most companies planning high-grade bond offerings opted to stand down.
Credit investors have been awaiting Paramount’s mega-deal for months. The bonds and loans were initially expected to be launched around midyear, but those plans were scuttled as it dealt with lawsuits brought by 12 state attorneys general and the Writers Guild trade union. Agreements to settle both cases were reached last week, allowing the deal to proceed.
Since the debt was structured to leave Paramount on the hook, rather than its lenders, if borrowing costs rise, the delay may prove costly.
The Paramount junk-bond sale is expected to top SoftBank Group’s recent offering as the largest-ever corporate high-yield bond sale. The high-grade portion would rank among the five largest on record, according to Bloomberg-compiled data.
The plan is to price all the bonds and loans for the acquisition financing by Sept 30. If the US$110 billion (S$142 billion) takeover does not close before October, Paramount must pay Warner Bros shareholders US$7 million (S$8.9 million) a day.
The deal to buy the company, announced in February, capped a months-long battle between Paramount and Netflix. The purchase was approved by Warner Bros shareholders in April and the US Justice Department in June. BLOOMBERG
