(Sept 30): Paramount Skydance Corp has attracted demand more than three times the expected size of its blue-chip bond offering to help fund its acquisition of Warner Bros Discovery, as banks look to wrap up the long-awaited buyout financing.  

Investors had placed more than US$109 billion (RM445 billion) of orders for the deal when the books closed on Tuesday afternoon, or 3.6 times the amount expected to be sold after lenders shifted part of the funding to loans, according to people familiar with the matter. That compares with an average of four times the deal size for investment-grade bond transactions in the currency so far this year, according to data compiled by Bloomberg.

The Paramount high-grade debt offering — the largest portion of a US$52 billion financing package that also includes junk bonds and loans — stands out in a year when hyperscalers have dominated the market with jumbo sales to finance the artificial intelligence infrastructure build-out. 

The US media giant has trimmed the size of the planned sale by US$2 billion to US$30 billion, while boosting the size of the loan portion of the deal by the same amount, the people said, asking not to be identified because they’re not allowed to speak publicly. It is offering first-lien US dollar-denominated bonds in eight tranches, with maturities ranging from two to 40 years.

Initial price talk for the longest-dated note, due in 2066, is a spread of about 3.65 percentage points above Treasuries, one of the people said. Apollo Global Management Inc, Bank of America Corp and Citigroup Inc are leading the offering, which is expected to price on Wednesday, the person added. 

Paramount, Apollo and the banks involved in the transaction either declined or didn’t respond to requests for comments. 

The debt is coming to market after a months-long delay and at a higher cost for Paramount, as a surge in Treasury yields has raised borrowing costs for companies. The bonds and loans were initially expected to be sold around mid-year, but the financing was put on hold after the Warner deal faced litigation until two settlements last week cleared the way for the offering.

Warner Brothers was the object of a bidding war earlier this year, with Paramount eventually beating out Netflix Inc in a US$110 billion transaction to create one of the world’s largest entertainment empires. Apollo, Bank of America and Citigroup provided the initial financing for the Warner acquisition, before selling down the debt to a group of 18 banks.

The financing package includes about US$12.4 billion-equivalent of junk bonds across US dollars and euros, as well as US$7.5 billion-equivalent of loans in both currencies. Both offerings are underway, with investors having placed orders of about US$15.6 billion for the high-yield notes and US$11.5 billion for the loans, according to people familiar with the matter. 

The investment-grade bond market has seen a flurry of deals in recent weeks to help fund mergers and acquisitions. In the latest major offering, Sysco Corp last week raised about US$17 billion through notes sold in three currencies.

Paramount’s proposed first-lien notes received investment-grade ratings by Fitch Ratings and S&P Global Ratings, while Moody’s Ratings placed the debt one step below that level. 

The Warner acquisition will increase Paramount’s debt by more than US$30 billion, pushing its leverage to about seven times a measure of earnings, according to Moody’s. 

“Credit metrics at closing will therefore resemble those of highly speculative issuers with very low single-B ratings,” it said in a Monday note to clients. “High leverage, concentrated ownership, plans to prime existing senior unsecured bondholders and management’s mixed track record in meeting financial targets reflect significant governance risk,” Moody’s added.

S&P said that its BBB- rating on the first-lien debt reflects the commitment by the Ellison family — who controls Paramount — to slash leverage to 3.75 times a measure of earnings by 2028 and three times in 2029.  

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