Paramount Woos Investors With $44 Billion Debt Offer To Fund WBD Deal As Judge Weighs Settlement

Paramount began marketing a massive $44.4 billion debt offering today to fund its acquisition of Warner Bros. Discovery as it awaits a decision by a federal judge that’s the last remaining hurdle to clinching the deal. “The actual closing date of the acquisition is uncertain,” Paramount said in an SEC filing. The merger “will only be consummated following the satisfaction or waiver of the closing conditions in the WBD merger agreement.” It set an Oct. 7 marker for the purposes of the offering. The David Ellison-led company has satisfied all conditions but one, a federal court judge must approve the proposed settlement of an antitrust lawsuit against Paramount by 12 State Attorneys General led by California’s Rob Bonta. Ellison and Bonta unveiled the agreement a week ago but U.S. District Judge Araceli Martinez-Olguin declined to approve it at a Sept. 24 hearing, Instead, she set aside a few days for opposition briefs. Responses were due by noon PT today with the AGs and Paramount both defending the settlement. Meanwhile, Paramount introduced the $44.4 billion offering, which includes about $32 billion in investment-grade debt, in both dollars and euros, and the equivalent of $12.4 billion in high-yield (junk) bonds, which have higher interest rates. According to Bloomberg, Bank of America and Citigroup were hosting calls today to market the debt and racked up enough demand to cover the offering. Watch on Deadline Paramount said it will use the proceeds, along with cash on hand, borrowing under previously announced term loan financings, and equity financing, to fund the purchase of WBD. A total $51.9 billion in debt financing transactions include a $7.5 billion seven-year Term B loan that lenders started marketing last week. The company has set a $49 billion bridge loan as contingent financing if the permanent financing isn’t in place by deal close. In the filing, and assuming the Oct. 6 close, Paramount calculated its total cash consideration payable to WBD common stockholders at $78 billion including the $31 a share payout, about a week of a so-called ticking fee that kicks in Oct. 1, and payments at closing of about $1.1 billion for vested WBD equity awards. Paramount unveiled its planned WBD acquisition in February with an equity value of about $80 billion and an enterprise value around $110 billion. Equity value reflects what WBD shareholders walk away with in cash. Enterprise value is equity value, plus debt, minus cash — or what the whole deal is worth. Warner had about $34 billion in debt and $3.4 billion in cash as of June. With a market capitalization of $11.5 billion, Paramount Skydance is significantly smaller than WBD (market cap of $77.4 billion). The merged company will carry over $80 billion in long term debt as Par assumes WBD’s obligations and piles on more to finance the acquisition. Annual interest expenses will be well over $6 billion, a level that has alarmed deal critics. Ellison has targeted $6 billion in synergies across the combined company. Equity funding includes up to $46.7 billion, plus ticking fees, from the Lawrence J. Ellison Revocable Trust and $250 million from RedBird Capital. But they won’t be paying that amount as both have assigned their subscription rights to other parties, including sovereign wealth funds of Saudi Arabia, Abu Dhabi and Qatar, and U.S. investment bank LionTree. The outside investors will each receive newly issued nonvoting shares of Paramount Class B stock at close. The Trust has committed to backstop the equity financing. The Ellisons were also said to be eying Elon Musk and other wealthy individuals to come on as equity investors.