Paramount Skydance kicks off $44B-plus bond blitz to fund Warner Bros. Discovery takeover

The financing, in plain English

Paramount Skydance is moving ahead with the core funding for its $110 billion takeover, launching a bond sale worth north of $44 billion across US dollars and euros. It is paired with about $32 billion of investment grade paper and roughly $12.4 billion-equivalent of high yield bonds, all within a $52 billion funding plan that also includes $7.5 billion of loans that banks began pitching to investors last week. Bank of America and Citigroup are running investor calls on Monday, marking the start of what is set to be the year's biggest M&A financing.

The investment grade portion consists of eight US dollar tranches with maturities stretching from 2 years out to 40. On the sub-investment grade side, the company is marketing a two-part euro tranche maturing in 5 and 8 years, plus three US dollar notes set to come due in 5, 8 and 10 years. Early talk on the 10-year US dollar high yield notes is for yields in the low 9 percent area.

The backdrop investors are staring at

Monday's launch meets a rough tape. Treasury yields have pushed to multi-decade highs, while a standoff between the US and Iran has lifted oil prices and pressured stocks and bonds on fears of stickier inflation and more Federal Reserve hikes. Many issuers that were eyeing high grade offerings chose to wait. Credit buyers, meanwhile, have been circling this Paramount deal for months.

Initially slated for midyear, the deal was put on ice as Paramount dealt with lawsuits from the Writers Guild trade union and from a dozen state attorneys general. Both disputes were settled last week, clearing the path. Because the documents put higher-rate risk on Paramount rather than its banks, the delay could make the tab steeper if borrowing costs keep rising.

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What milestones are left

All bonds and loans tied to the acquisition are slated to be priced by Wednesday. The purchase agreement was unveiled in February, received approval from Warner Bros. Discovery shareholders in April, and cleared the US Justice Department in June. If the takeover is not completed before October, Paramount is obligated to pay Warner Bros. shareholders $7 million per day.

The high yield portion is expected to surpass SoftBank's recent offering to become the largest corporate junk bond sale on record, and the investment grade slice would land among the five biggest ever. Big picture, this is the kind of supply that can nudge borrowing costs, risk appetite, and even index allocations, which is worth watching if you own bond funds or broad market ETFs.

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