MW As Paramount's stock soars, bonds see net selling despite juicy yields and discounted prices
By Ciara Linnane
Paramount's bonds due 2032 and 2036 are yielding more than 7%
Paramount Global's stock was up 8% on Friday after a report that Sony's movie studio division is in talks with Apollo Global Management about joining a bid for the parent of CBS and other media properties.
Paramount's bondholders seemed less bullish, however, with the company's outstanding bonds seeing net selling on the day.
Paramount is currently in merger talks with Skydance Media, the independent production company run by David Ellison, son of Oracle Corp. founder Larry Ellison. Skydance has previously partnered with Paramount on a number of movies, including the 2022 blockbuster, "Top Gun: Maverick."
The two entered an exclusive 30-day period earlier this month.
Shari Redstone, the daughter of the late Paramount Chief Executive Sumner Redstone, has reportedly been keen on selling a controlling stake in National Amusements - her privately held company that owns around 80% of Paramount's shares - since last year.
For more, read: Paramount plans to trim size of its board amid merger talks
Redstone is understood to favor the Skydance offer over a competing all-cash $26 billion bid from private-equity firm Apollo $(APO)$, which the board rejected allegedly amid concerns about Apollo's financing.
Paramount (PARA) is home to its namesake movie studio; CBS; cable channels including Nickelodeon, Showtime and Comedy Central; and the Paramount+ streaming service.
The New York Times reported late Thursday that Sony $(SONY)$ and Apollo are considering making a joint bid. The bid would be an all-cash offer for Paramount's outstanding shares, though other terms are still being worked out, the report said, citing people familiar with the matter.
Paramount's bonds are currently offering some juicy yields, after pushing higher in the year-to-date in tandem with the move in Treasurys, as the following chart from data solutions provider BondCliQ Media Services shows.
As the chart shows, the 6.875% notes that mature in April of 2036 are currently yielding 7.93%, up from 6.71% at the beginning of the year.
The 4.2% notes that mature in May of 2032 are yielding 7.30%, up from 5.92 % at the start of the year. Those levels compare with a roughly 5.75% yield for the broader U.S. investment-grade corporate-bond market.
Prices of the bonds have come down in the year-to-date, as the following chart shows, with many trading below par. That means investors with the right time frame can buy them at a discount.
The 4.2% notes that come due in May of 2032, for example, are trading at 84.84 cents on the dollar.
The bonds have been mostly sold in today's session although volumes are thinning heading into the weekend.
Paramount has more than $14 billion in bonds outstanding, according to FactSet. The bulk of that is due to mature in 2043.
The stock has gained 8% in the month to date, outperforming the S&P 500 SPX, which is down 4%. In the year to date, it has fallen 18%.
-Ciara Linnane
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April 19, 2024 12:59 ET (16:59 GMT)
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