Paramount's $54B Warner Bid: Uncapped Debt Rates & Downgrade Risk Loom

• Paramount's bid for Warner Bros. Discovery involves a colossal $54 billion debt, posing a significant financial hurdle.
• Paramount's temporary financing lacks a locked-in maximum rate for permanent borrowings, risking spiraling costs if debt markets worsen.
• The debt package structure places the risk of rising interest rates on Paramount, not the lenders, during a potentially extended takeover battle.
• Paramount aims for investment-grade status through cost cuts to secure cheaper rates, but credit raters project higher debt leverage (around 7x EBITDA) than Paramount's estimate.
• Paramount's hostile offer competes with a Netflix bid, which Warner's board approved, potentially driving up the winning price and Paramount's debt.

Why It Matters: Paramount's Warner bid hinges on risky debt financing with uncapped interest rates.