Fitch Ratings cut its debt assessment on the newly combined Skydance entity Monday evening, pointing to elevated leverage and the uncertain path of merging two media giants. The move came hours after the Paramount-Warner Bros. Discovery transaction formally closed, and mirrors a similar downgrade from S&P Global last month.
The debt picture
The merged company now carries roughly $80 billion in obligations, a figure that places the deal among the largest leveraged buyouts on record. Fitch projects leverage at 7.8 times EBITDA for fiscal 2026, declining to 6.2 times next year and 4.5 times in 2028. The Ellison family has publicly targeted a drop below 3.75 times by 2028 and 3.0 times by 2029, though the agency's base case assumes those levels require equity issuance or asset sales beyond what management has outlined.
Financing costs climb
A $42.5 billion bond sale completed last week funded the transaction, but the price was steep. Some tranches priced above 9 percent, pushing annual interest expense roughly $500 million above earlier estimates. Paramount had hedged Treasury exposure, which will absorb a portion of the increase, according to people familiar with the positioning. S&P's Naveen Sarma attributed the premium to a delay forced by state attorneys general, led by California's Rob Bonta, that pushed the closing into a higher-rate environment.
Synergy bets and workforce reality
Management has flagged more than $6 billion in cost savings, emphasizing technology consolidation, real estate rationalization and marketing efficiency rather than headcount reductions. Yet a staff memo from co-CEOs David Ellison and Ynon Kreiz acknowledged that integration will bring "difficult decisions that effect our workforce." Fitch flagged the synergy target as material to deleveraging but uncertain given structural pressure on linear television, streaming competition and the hit-driven nature of content spending.
What watches next
The financing package totaled $52 billion, split across investment-grade and high-yield bonds in dollars and euros alongside term loans. Executing the deleveraging timeline without equity contributions or disposals will require free cash flow generation that Fitch does not currently model. The equity slice of the transaction sits at approximately $47 billion.