By Fabiana Negrin Ochoa

Paramount Skydance's $81 billion deal for Warner Bros. Discovery is highly complex and poses credit risks, Fitch Ratings says as it cut the media conglomerate to junk status.

Paramount is poised to take control of Warner after winning a bidding war for the entertainment company against Netflix. The streaming giant pulled the plug on its bid last week after the Warner board said Paramount's $31-a-share offer was better.

If the takeover goes through, it would be a seismic shift for the entertainment industry, giving Paramount ownership of Warner, HBO and many popular cable networks including CNN.

Fitch said it views the proposed acquisition as structurally complicated, citing the scale of financing required, limited capital structure transparency, and the challenge of integrating two large media groups.

In a report on Monday, Fitch warned of the risk that Paramount's financial and leverage targets will slip, and downgraded the group's credit rating to BB+ from BBB-, and placed it on rating watch negative.

The downgrade reflects competitive pressures across the media sector and continued free cash flow headwinds from significant transformation costs, Fitch said.

If completed, Fitch expects the deal to drive leverage up significantly, noting Paramount's $58 billion debt commitment--which includes an existing $3.5 billion revolving credit facility--to fund the acquisition.

Paramount had $14 billion in outstanding debt as of end-December.

While the acquisition would improve Paramount's competitive position, it could also bring regulatory scrutiny over issues such as market concentration and competition, which could put the deal in jeopardy and extend the timeline to close, Fitch said.

Fitch expects to resolve the ratings watch once there is more clarity on final transaction terms, financing and post-close deleveraging priorities.

For now, Fitch's base case is that free cash flow will be negative for fiscal 2026 and that common dividends will stay flat over the rating horizon.

Write to Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com

(END) Dow Jones Newswires

March 02, 2026 21:49 ET (02:49 GMT)

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