The scaled-up Skydance begins life on Oct. 6 with a balance sheet that will shape every content, streaming and staffing decision for the next three years. When Paramount Skydance’s takeover of Warner Bros. Discovery formally closes, the combined company will carry nearly $80 billion in debt — far above the roughly $53 billion in gross debt Warner Bros. Discovery carried after Discovery’s 2022 WarnerMedia deal.
The leverage clock is already running
Skydance has until the end of 2029 to reduce leverage materially. S&P Global estimates the company’s debt-to-earnings ratio at 7x for 2026 and 2027; the target is 3x or lower by 2029. If the company misses the lender-agreed targets, Larry Ellison’s personal commitment acts as a backstop.
That backstop is central to the credit story. Moody’s rates Skydance’s debt Ba3, one notch below investment grade, while S&P and Fitch’s CreditSights are slightly higher. The split matters because each notch changes borrowing costs on the short-term credit that a company this size uses routinely.
No cash cushion in 2027
Analysts project Skydance will operate through 2027 with negative cash flow, leaving little room for opportunistic bets. The company has committed to $6 billion in operational savings over three years, much of it from cutting overlapping roles. But the cost of achieving those savings — severance, real estate exits and platform migration — is front-loaded.
The other constraint is where the cash currently comes from. Hunter Martin of CreditSights points to traditional TV networks such as CNN, TNT, TBS, Discovery, Nickelodeon and CBS. They are in secular decline, but still contribute 70%-plus of profits and almost all free cash flow. That means streaming investment has to be funded without starving linear too quickly.
Three things analysts are watching
- Leverage milestones: whether the 7x ratio starts falling fast enough to hit the 2029 target.
- Content and sports spend: the first big signal was a seven-year, $7.7 billion UFC commitment; NFL rights talks are next.
- Tech-stack execution: merging Paramount+, HBO Max and Pluto TV around better product and recommendation tools.
There is also a price already paid for delay: CreditSights estimates the 12-state antitrust challenge added roughly $500 million in higher interest costs on short-term debt.
Jawad Hussain of S&P Global put the sequencing simply: “They need to move as quickly as possible to get this leverage down.” If Skydance can do that, 2028 becomes the year it starts making money; if not, the backstop and the credit metrics become the story.
Source: Variety
