Bank of America and Citigroup have distributed and resold the multibillion-dollar bridge loan supporting Paramount Skydance Corp's (PSKY.US) acquisition of Warner Bros. Discovery (WBD.US) to a broader banking consortium. This marks a key step for one of the year's largest merger financings. According to a document released on Thursday, 18 lending institutions have now purchased portions of the total debt, which amounts to $49 billion. The financing was initially provided by Bank of America, Citigroup, and Apollo Global Management, with an original size of $54 billion. The document also indicated that a separate $3.5 billion one-year credit facility has been canceled. Deutsche Bank and Wells Fargo are among the new lenders participating in the permanent debt, which consists of two tranches—$2.5 billion each with three-year and five-year terms—alongside a $5 billion five-year revolving credit facility.
The progress in debt syndication and the new financing arrangements follow Paramount Skydance's earlier agreement this week with Gulf-region funds on an equity syndication deal. This development signals another major step forward toward completing the acquisition. Bridge loans are typically used to cover immediate funding gaps and are often employed by companies preparing to execute acquisitions. They are usually replaced within weeks or months by permanent debt distributed among a larger group of lenders. Although bridge loans are short-term, they help banks build relationships with companies, potentially leading to more lucrative assignments in the future.
The company plans to refinance this bridge loan later through a combination of investment-grade bonds and junk bonds. This step could face challenges if market volatility persists. Earlier, the outbreak of conflict in the Middle East triggered a sell-off in credit markets, forcing Wall Street banks to make multiple adjustments while reducing exposure to large financings such as those for Electronic Arts and packaging company Sealed Air. A rally in financial markets stalled on Thursday amid doubts over whether a two-week ceasefire agreement between the U.S. and Iran would hold.
Borrowers typically choose either investment-grade debt or junk bonds to finance acquisitions, rather than a combination of both. This complexity is expected to require pitching the deal to a broader range of investors. As previously reported by Bloomberg, the majority of the debt financing will consist of investment-grade collateralized bonds, with Apollo's insurance operations anticipated to subscribe to a significant portion.
The high-stakes bidding war for Warner Bros. concluded in February after Paramount raised its offer to $31 per share. Netflix, which had previously agreed to acquire a majority of Warner Bros.' operations for $27.75 per share, declined to match the revised bid. Paramount, led by CEO David Ellison, adjusted the terms of its offer after several rejections from Warner Bros. These terms included billions of dollars in personal equity guarantees from a trust established by Ellison's father, Larry Ellison, Chairman of Oracle Corporation and one of the world's wealthiest individuals.
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