MW Paramount's stock slides after Edgar Bronfman Jr. pulls bid, but bondholders seem to like the news
By Ciara Linnane and Mike Murphy
Spreads on the company's most liquid bonds tightened by about 10 basis points on Tuesday, after steadily tightening since Friday
Paramount Global's stock (PARA) slid 5% Tuesday after American businessman Edgar Bronfman Jr. scrapped his bid for the company's parent, National Amusements, but bondholders seemed to like the news.
Spreads on the company's most liquid bonds tightened by about 10 basis points on Tuesday, after steadily moving tighter since Friday.
The bonds have seen net buying over the last week, with most of the activity concentrated in the 6.375% notes that mature in March of 2062, as the following charts from data-solutions provider BondCliQ Media Services show.
Bondholders are often viewed as "smart money," because they are sharply focused on metrics such as cash flow that ensure that an issuer can make interest payments and that bondholders will fully recoup their investment when bonds mature.
The spread performance is captured by the green arrow. Spread is the extra premium bondholders demand as compensation for taking on risky corporate debt.
The bonds are rated BB+ by S&P Global Ratings, which is one notch into junk territory. Moody's Ratings has the credit on review for a possible downgrade into junk. That makes Paramount a crossover credit, but it will be deemed to be junk if Moody's pulls the trigger.
The yellow arrow highlights buying of the long bond.
Paramount has almost $15 billion in outstanding bonds, with the bulk, $2.7 billion worth, coming due in 2043.
Paramount's hefty debt burden has played a role in the many twists and turns surrounding the sale of National Amusements, which is majority owned by the Redstone family.
Shari Redstone, the current majority owner of National Amusements - which she inherited from her father, the late Sumner Redstone - has been in negotiations for months.
In July, Redstone agreed to sell the company for about $8 billion to David Ellison's Skydance, the independent studio behind "Top Gun: Maverick" and "Mission: Impossible - Dead Reckoning," among other movies. Skydance had pledged to put up $1.5 billion in cash to pay down debt.
Under the deal, Skydance would first buy National Amusements, then Skydance and Paramount would merge. But that deal included a 45-day "go-shop period" in which the special Paramount committee was allowed to review other bids.
Bronfman made a final $6 billion bid last week, shortly before the deadline was to expire. Bronfman is a former CEO of Warner Music Group Corp. $(WMG)$ and Canadian conglomerate Seagram.
That offer included a $1.7 billion proposal that would have offered shareholders who are not Redstone a premium to cash out at $16 a share, rather than the $15 a share Skydance had proposed.
The Paramount board extended the deadline by 15 days, angering Skydance, which reportedly accused it of breach of contract.
But the New York Times reported late Monday that concern had developed over Bronfman's ability to secure sufficient financing.
Paramount's holdings include CBS, cable networks including MTV and Comedy Central, its namesake movie studio and the Paramount Plus streaming service.
In April, Bob Bakish stepped down as Paramount's chief executive and was replaced by a three-person office amid reported tensions over the possible deal with Skydance. Earlier this month, Paramount announced a big round of layoffs.
Paramount and other media companies have cut costs, laid off staff and sought to combine as they try to find a path to profits for their streaming services and to compete with Netflix Inc. $(NFLX)$, which some analysts have already crowned the winner of the streaming wars that began more than a decade ago.
Studios have pulled back on TV production in the wake of last year's writers and actors strikes.
Paramount's stock has fallen 27.6% in the year to date, while the S&P 500 SPX has gained 18%.
Bill Peters contributed.
-Ciara Linnane -Mike Murphy
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August 27, 2024 11:51 ET (15:51 GMT)
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