PSKY's High-Grade Bond Offering To Fund Warner Takeover Tops $109B Ahead Of Wednesday Pricing: Report

• The high-grade sale is the biggest piece of a $52 billion financing package for the takeover. 
• Paramount cut the planned bond sale by $2 billion to $30 billion and raised the loan slice by the same amount after demand came in strong, people familiar with the matter told Bloomberg. 
• Paramount's CEO has previously said that they expect the deal to close soon.

Paramount Skydance (PSKY) reportedly drew more than $109 billion in orders for a high-grade bond sale to help fund its takeover of Warner Bros. Discovery. (WBD).

Books closed Tuesday afternoon at about 3.6 times the amount expected to be sold after lenders moved part of the funding into loans, Bloomberg reported. That was a bit below this year’s average of about four times for dollar investment-grade deals, the report said, citing internal data.  

PSKY shares closed 3% lower on Tuesday and stayed flat after hours.

What The Offering Looks Like

The high-grade sale is the biggest piece of a $52 billion financing package, bifurcated between bonds and loans. Paramount cut the planned bond sale by $2 billion, to $30 billion, and raised the loan slice by the same amount after demand came in strong, people familiar with the matter told Bloomberg.

The bonds are first-lien dollar notes in eight parts, maturing in as little as two years and as long as 40. Talk on the longest note, due in 2066, started around 3.65 percentage points over Treasuries. Apollo, Bank of America and Citigroup are leading the deal. Pricing is expected Wednesday.

The rest of the package includes about $12.4 billion-equivalent of junk bonds and $7.5 billion-equivalent of loans. Bloomberg said those books also filled, with about $15.6 billion of high-yield orders and $11.5 billion of loan orders. Fitch and S&P rated the first-lien notes investment grade; Moody’s put them one notch below.

Why The Sale Matters For The Buyout

This is the last large step in replacing short-term bank commitments with lasting debt so Paramount can pay cash for Warner. The company agreed in February to buy Warner Bros. Discovery for $31 a share, valuing the deal at about $110 billion including assumed debt, after beating Netflix. If closing slips past Sept. 30, Warner holders get extra “ticking” cash of about $7 million a day.

Two settlements last week ended litigation that had stalled the financing.

Moody’s said the purchase would add more than $30 billion of debt and lift leverage to about seven times earnings. S&P’s BBB- rating, Bloomberg reported, hangs on the Ellison family’s pledge to cut that ratio to 3.75 times by 2028 and three times by 2029. Ellison’s family controls Paramount.

How Did PSKY Retail Traders React?

On Stocktwits, retail sentiment around PSKY stock fell from extremely bullish to bullish territory over the past 24 hours, while message volume stayed at high levels.

PSKY stock has fallen 25% year-to-date, while WBD added 7%. 

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