Paramount Global's already-junk credit rating is set to be downgraded further by S&P Global Ratings, the agency announced, citing "major ongoing uncertainties" surrounding the company's proposed merger with Warner Bros. Discovery.
The downgrade reflects growing concerns about deal execution risk and Paramount's deteriorating financial position as the streaming wars continue to burn cash. S&P currently rates Paramount at BB-, three notches below investment grade, and the additional cut would push the company deeper into junk territory.
Translation: Lenders are getting nervous. When credit rating agencies start talking about "major uncertainties," it's usually code for "we're not sure this deal is going to close, and even if it does, we're not confident about the combined entity's ability to service its debt."
The Warner Bros. Discovery merger, announced earlier this year, was supposed to create a media giant with the scale to compete against streaming leaders like Netflix and Disney. Instead, it's turning into a case study in deal complexity. Regulatory scrutiny, integration challenges, and questions about strategic fit have all contributed to the uncertainty.
For Paramount, the timing couldn't be worse. The company's traditional media assets—linear TV networks and box office releases—continue to decline, while its streaming platform Paramount+ has struggled to achieve profitability despite subscriber growth. The company reported $1.9 billion in streaming losses last year as it invested heavily to compete.
The credit downgrade will make borrowing more expensive at precisely the moment when Paramount can least afford it. Higher interest costs will further pressure margins and could force the company to cut content spending or scale back streaming investments—exactly the opposite of what it needs to do to remain competitive.
What's particularly concerning is the lack of obvious alternatives if the Warner Bros. deal falls through. Paramount's controlling shareholder, National Amusements, has been exploring strategic options for months, but the pool of potential buyers with both the financial capacity and regulatory clearance to acquire a major media company is limited.
The media consolidation wave that seemed inevitable a few years ago has hit significant headwinds. Regulators are more skeptical of mega-mergers, and potential acquirers are increasingly focused on managing their own debt levels rather than taking on new leverage for transformative deals.
For now, Paramount finds itself in a precarious position: too weak to thrive independently in the streaming era, but with a deal that may not close and a credit profile that's making investors increasingly uncomfortable.
