Fitch Downgrades Paramount Skydance and Paramount Global to Junk Amid Warner Bros Discovery Deal Concerns

Fitch Ratings has downgraded Paramount Skydance Corp (NASDAQ: PSKY) and Paramount Global to junk status, citing rising financial risks tied to the company’s planned acquisition of Warner Bros Discovery Inc (NASDAQ: WBD). The move highlights growing pressure across the media sector as companies navigate heavy debt loads and shifting industry dynamics.

Fitch lowered both companies’ Long-Term Issuer Default Ratings to BB+ from BBB-, pushing them into non-investment grade territory. The Short-Term IDR was also cut to B from F3. All ratings have been placed on Rating Watch Negative, signaling the possibility of further downgrades. A BB+ rating reflects elevated credit risk and a greater likelihood of default compared to investment-grade bonds.

According to Fitch, the downgrade reflects intensifying competitive pressures in the media industry and ongoing free cash flow challenges driven by significant transformation costs. The agency also flagged uncertainty surrounding Paramount’s proposed takeover of Warner Bros Discovery, warning that the largely debt-funded transaction could significantly increase leverage and strain the company’s balance sheet.

Paramount recently offered $31 per share, valuing Warner at approximately $110 billion. The bid surpassed a competing offer from Netflix Inc (NASDAQ: NFLX), which ultimately chose not to raise its proposal. Paramount and Netflix had been engaged in a high-profile bidding war after Warner initially agreed to a deal with Netflix before deeming Paramount’s offer superior.

The combined entity is expected to carry net debt of roughly $79 billion, raising concerns among credit rating agencies. Paramount also paid Netflix a $2.8 billion termination fee owed by Warner after scrapping its previous agreement.

Fitch’s downgrade follows similar actions by Moody’s and S&P Global, both of which recently placed Paramount under review for a potential credit rating downgrade, underscoring mounting uncertainty surrounding the Paramount-Warner merger.