(Bloomberg) — Fitch Ratings downgraded Paramount Skydance Corp.’s corporate and long-term borrower ratings to junk following the media company’s agreement to buy larger rival Warner Bros. Discovery Inc., a deal that will saddle the combined business with $79 billion in net debt.
Fitch lowered its ratings on Paramount to BB-plus, according to a statement Monday. It was previously BBB-minus, the lowest investment-grade rating. The ratings service also said Paramount is on negative watch pending details on deal terms, financing and deleveraging efforts.
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“The downgrade reflects competitive pressures across the media sector” and pressure on free cash flow from transformation costs, Fitch said. Fitch believes its leverage and free cash flow may take longer than anticipated to improve.
Read: Paramount Global May Be Cut by Moody’s (1)
Paramount agreed to buy Warner Bros. last week in a $31 a share takeover. With a total value of $110 billion, it’s one of the biggest mergers and media deals of all time.
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