79 billion debt topped! Paramount (PSKY.US) acquisition triggers credit avalanche, Fitch first downgrades its rating to "junk".

On February 27, 2026, Warner Bros. Discovery (WBD.US) officially accepted a $110 billion acquisition offer from Paramount (PSKY.US). Although this deal marks the birth of a massive entertainment empire covering film studios, streaming platforms, and cable TV networks, the capital markets have shown significant concerns about its financial health. Due to the highly complex leverage operations and heavy debt burden involved in the transaction, the new company's credit quality faced collective downgrades from major credit rating agencies in the days following the agreement. Credit rating giant Fitch Ratings released a report on March 2, 2026, announcing the downgrade of the long-term issuer default ratings for Paramount and its subsidiaries from the investment-grade "BBB-" to "BB+", also known as "junk" or "speculative" grade. The agency also stated that Paramount was under negative watch, pending clarification on terms of the transaction, financing, and deleveraging measures. Fitch pointed out in the report that while the merger of the two giants had significant scale and content synergy potential, the acquisition led to a sudden increase in leverage for the new company. According to financial forecasts, the merged entity will carry a massive $79 billion in net debt, and the fragility of this financial structure significantly weakens its ability to withstand risks in the current highly competitive and structurally changing media environment. Fitch stated, "The downgrade reflects the competitive pressure across the entire media industry," as well as the pressure that transformation costs place on free cash flow. Fitch believes that the improvement in leverage and free cash flow of the combined entity may take longer than expected. Meanwhile, Standard & Poors Global and Moody's Corporation also responded negatively to this significant transaction. Standard & Poor's analysts believe that despite the potential cost synergies from the merger, the new company faces risks in integration execution and the continued cash-burning nature of the streaming business, making its credit outlook not optimistic. Moody's Corporation has put the ratings of the relevant companies under review for downgrade and warned that if the new management cannot reduce leverage to below 5 times within the next 18 months through asset divestitures, significant layoffs, or cash flow optimization, their ratings could face further downgrade. The market generally believes that this rating downgrade will directly increase the financing costs of the merged entity. As debt ratings slip into speculative grade, the new company will have to pay a higher interest premium when refinancing in the public market, further testing the management's resolve to "deleverage" while integrating the business.