Banks have already attracted enough investor bids to cover most of a $49 billion debt package intended for the merger between Paramount Skydance Corp. and Warner Bros. Discovery Inc. Yet they have not yet formally opened the sale of the debt.
For the euro-denominated eight-year second-lien bonds, the expected yield is 7.25% to 7.5%. For the five-year version, it is 6% to 7%.
Dollar-denominated second-lien bonds will pay about 1 percentage point more than the euro notes.
For the investment-grade loans, banks are discussing a spread of 250 to 275 basis points above the benchmark rate. This early bidding is a safety move. Banks want to avoid "hung" loans - debt that sits unsold on their books. Risks they worry about include a resurgence of inflation, rising interest rates, a collapse of the AI trade, or new tensions in the Middle East.
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The original temporary financing was $57.5 billion. That was later reduced to $49 billion. For example, Warner Bros. issued $15 billion in investment-grade loans back in May. Those will be repaid early after the merger closes.
The new debt will replace a short-term bridge loan. Citigroup, Bank of America, and Apollo Global Management Inc. were among the initial lenders that provided that bridge financing. All three declined to comment.
Representatives for Paramount Skydance Corp. and Warner Bros. Discovery Inc. also declined to comment or were not available.
It is expected that Apollo's insurance division will purchase a significant portion of the investment-grade bonds. Some investors who bought the earlier $15 billion Warner Bros. loans may reinvest in the new entity.
Pre-marketing, also known as "soft circling," allows banks to gauge demand before formally underwriting the entire debt package. If investor appetite appears weak, banks can adjust pricing or reduce the offering size ahead of the official launch. This strategy has become increasingly common in volatile markets, where sudden shifts in sentiment can derail large financings.
The official debt sale is set for July. But first, regulators must sign off. The European Union's July 22 deadline will determine whether it clears the transaction or initiates a thorough antitrust investigation. US and UK authorities have also raised concerns about the deal's effect on media ownership diversity.
The upcoming regulatory decisions will be pivotal. If the European Commission launches a Phase II investigation, it could take months and create uncertainty for the debt markets. Any adverse ruling could force parties to renegotiate terms or delay the financing, leaving banks exposed to the risk of holding unsold debt.
For now, banks have a pile of bids waiting. The real test comes when the formal launch begins.
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