Warner Bros. Discovery Inc. has increased a loan sale for the second time, enabling the media giant to completely replace $15 billion in short-term financing. The move comes as the company prepares for its planned takeover by Paramount Skydance Corp., a consolidation valued at $110 billion that will unite two of Hollywood's largest legacy media companies.
Loan Sale Expansion
A JPMorgan Chase & Co.-led bank group expanded the loan on Tuesday from approximately $10 billion, according to a person with knowledge of the matter. The offering had already been increased last week due to strong demand for credit, despite a volatile macroeconomic environment. The dollar-denominated portion is expected to range between $12.5 billion and $13.75 billion, while the euro tranche, initially set at €1 billion (about $1.16 billion), could potentially reach €2 billion. The source requested anonymity as they are not authorized to speak publicly.
Refinancing Strategy
Warner Bros. is seeking to refinance its short-term debt ahead of the acquisition. The larger loan size means all of the so-called bridge loan would be replaced. Loans are typically repaid at par when ownership changes, but in this case, investors have the opportunity to purchase the new loans at a discounted rate of 99 cents on the dollar. This discount could allow them to realize a quick profit if the sale to Paramount proceeds. Commitments for both tranches are due on Wednesday.
Merger Financing
The proposed financing precedes the $110 billion merger of two of Hollywood's most prominent legacy media companies. In addition to the Warner Bros. loan, Bank of America Corp. and Citigroup Inc. are preparing to sell approximately $50 billion in debt to support the acquisition, marking one of the most anticipated offerings of the year. The debt package may include around $30 billion in investment-grade bonds, $12 billion in high-yield bonds, and $7.5 billion in loans, and could be marketed to investors within the next few weeks, according to Bloomberg reports.
The buyout agreement, announced on February 27, concluded a months-long contest between Paramount and Netflix Inc. for Warner Bros. Shareholders of Warner Bros. approved the transaction in April.
