Recently, S&P Global Ratings downgraded the debt of the well-known film and television giant Paramount to "junk" status, an undoubtedly low rating. The reason given for this downgrade was the company's continuing decline in broadcast and cable television businesses, which has put pressure on its cash flow. It was revealed that Paramount had a debt of $14.6 billion by the end of last year, while their market value had already fallen to $8 billion.
In recent years, Paramount's debt has been growing larger. The company has maintained an open attitude towards potential buyers, not outright rejecting acquisitions but also not rushing to sell, even though the company is heavily indebted. Currently, the more prevalent acquisition rumors include the following:
The company's Chairman of the Board, Shari Redstone, and her representatives have considered selling her family's holding company, National Amusements Inc., to independent producer David Ellison. National Amusements Inc. holds shares in Paramount.
Additionally, according to an insider, Apollo Global Management has proposed to buy Paramount's Hollywood production company for about $11 billion.
Independent media mogul Byron Allen has proposed to acquire the entire company.
However, at present, these are still rumors and no company has reached the formal acquisition process. Meanwhile, Paramount is trying to stabilize its debt scale. In early March, Paramount agreed to sell a 13% stake in its Indian television business to its partner, Reliance Industries Group, for $517 million, offloading some peripheral businesses for funds to temporarily relieve some pressure.
However, the downgrade following the accumulation of debt may not be entirely bad for Paramount. According to relevant regulations and agreements, Paramount will not have to repay the related debts after the acquisition is completed, greatly reducing the risk of acquisition.
Analysts from CreditSights, led by Hunter Martin, also wrote in a report that the downgrade could make a change-of-control clause in Paramount's senior notes ineffective. These limited notes were originally set to trigger a 101-cent buyback upon acquisition. They wrote that the lower-rated bonds still retain this option, which are more leniently defined in terms of the impact of the downgrade event.
