Fitch Ratings downgraded Paramount Skydance's long-term issuer default rating to BB from BB+, citing the debt the company is taking on as part of its acquisition of Warner Bros. Discovery.

The ratings agency announced the downgrade on Monday, a day ahead of the $81 billion acquisition's expected closing. Fitch estimated the combined company's leverage at 7.8x in fiscal year 2026.

"The downgrade reflects materially higher leverage after the acquisition and significant execution and integration risks," Fitch said. "It also reflects uncertainty about the company's ability to achieve its stated synergies, which are material to its deleveraging target."

Fitch projected that synergies in the deal will help leverage decline to 6.2x in fiscal 2027 and 4.5x in fiscal 2028.

Still, the high leverage immediately after closing will increase the company's sensitivity to integration snags and operational underperformance, the agency said.

Fitch's projection assumes that the company, set to be renamed "Skydance" after the merger, will realize 85% of the more than $6 billion in cost synergies it has identified.

For the company to hit its stated commitments of reducing net leverage to below 3.75x in fiscal 2028 and below 3.0x the following year, it would need to sell assets or issue new shares, Fitch said, adding that such moves aren't included in its base case. If the company goes that route, it could support faster deleveraging.