Fitch cuts Paramount to junk grade after $31-a-share Warner deal

Fitch Ratings downgraded Paramount Skydance and Paramount Global’s long-term issuer default ratings from investment grade to BB+, placing the company on negative watch and warning the planned takeover of Warner Bros. Discovery would leave Paramount with “materially elevated leverage.”

The move follows Paramount’s $31-per-share offer to acquire Warner Bros. Discovery and ends a bidding contest in which Netflix exited after Paramount’s higher bid. Fitch said the downgrade reflects the scale and complexity of the deal and the limited information available about how the combined company will be financed and structured. “Limited visibility” into the post-transaction capital structure — including the ranking and security package of any new debt and the split between secured and unsecured tranches — raises concerns that the deal could create “structural subordination and potential priming of existing unsecured creditors,” Fitch said.

Paramount agreed to take on roughly $33 billion of Warner Bros. Discovery debt, a figure that contributes to estimates that the combined company will carry about $79 billion in long-term or net debt. Market commentary has described the transaction as one of the largest media mergers in history, though estimates of the deal’s enterprise value diverge; some analyses place it near $110–111 billion, while another metric cited in reporting flagged an $81 billion figure. Fitch did not resolve those discrepancies in its statement, and it placed particular emphasis on how new borrowings would be layered across the group.

Fitch also cited industry-wide pressures and the cost of transforming legacy media businesses as drivers of weak near-term free cash flow. “This rating downgrade reflects competitive pressures across the media industry,” the agency said, noting that transformation costs could lengthen the time required to improve leverage and cash generation. Moody’s and S&P Global had already put Paramount on review for potential downgrades earlier in the week, signaling consensus concern among the major rating agencies.

The ratings action had an immediate market impact. Paramount Skydance shares dropped more than 8 percent after the downgrade was reported, reflecting investor anxiety about higher finance costs and execution risk while the company sits on negative watch pending clarity on financing and deleveraging plans.

Fitch’s negative watch means the rating could be cut further if Paramount does not provide definitive detail about how the deal will be financed, the expected capital-structure treatment of new debt and the timeline and measures for deleveraging. The agency flagged the potential for a more bifurcated secured-versus-unsecured capital structure that could prioritize new secured lenders ahead of existing unsecured creditors.

The downgrade sharpens the commercial stakes for Paramount and for lenders expected to underwrite the transaction. Higher-rated debt would likely carry increased spreads, raising the overall cost of financing and complicating any plan to retire or refinance borrowings quickly. As the transaction moves toward closure, investors and creditors will watch for concrete capital-structure proposals and a credible deleveraging path to determine whether the company can restore its investment-grade standing.