David Ellison won the battle for Warner Bros., but the war is just beginning.
asserted
war → win → Bros.
Ellison and his co-CEO Ynon Kreiz must get through the wolves of Wall Street to make the finances of smashing together two studios in an eye-popping $110 billion acquisition work.
asserted
finances → get → studios
And they’re off to a rough start.
asserted
they → ’re → start
In order to fund the deal, Ellison and co. had to raise money through various sources, including around $24 billion from Middle Eastern sovereign funds, a few more billion from RedBird Capital and the Ellison family chipping in.
asserted
family → fund → Capital
The company is also raising $42.4 billion from the bond market.
asserted
company → raise → market
But Skydance has certain financial targets it promised its debt holders — the first one being in 2028.
asserted
one → have → 2028
It’s not a specific amount, but rather a ratio of its debt compared to its earnings.
asserted
It → ’ → earnings
Naveen Sarma, sector lead for U.S. media and telecom at S&P Global, doesn’t believe Skydance can hit its target in 2028.
asserted
Skydance → believe → 2028
“There’s a gap they’re going to have to bridge,” Sarma says, believing they’ll have to cover anywhere between $10 billion and $15 billion to bridge that gap.
asserted
they → ’ → gap
“How much of that comes from an additional equity infusion from [David’s dad] Larry Ellison?”
asserted
much → come → dad
Much of the attention has been paid to the elder Ellison and his $180 billion-ish net worth.
asserted
Much → pay → Ellison
(Though much of that is tied to Oracle’s stock, and his ability to backstop the company going forward.)
asserted
much → tie → company
Adding to the financial load, the antitrust lawsuit from California Attorney General Rob Bonta and the WGA delayed the merger’s closing months.
asserted
lawsuit → add → months
During that time, the cost of borrowing money (i.e. interest rates) went up as did Treasury yields.
asserted
yields → borrow → money
All told, Paramount will have to pay up to an additional $500 million per year due to the spike in borrowing costs, per Bloomberg estimates.
asserted
Paramount → tell → estimates
“It just means a deeper hole for them to dig out of,” Sarma tells Page Six Hollywood.
asserted
Sarma → mean → hole
“There’s going to be a challenge to de-lever anyway, it just makes it more of a challenge.”
asserted
it → go → challenge
In plain English, “de-leveraging” means paying down debt.
asserted
leveraging → leverage → debt
And with so much of it on the books, Skydance isn’t expected to generate positive cash flow — meaning it brings in more cash than it spends — until 2028 at the earliest.
asserted
it → expect → earliest
The company also has around $6 billion in synergies — the amount of operating costs it has promised to cut, which typically involves layoffs — but Ellison has promised other ways of reducing costs that don’t involve laying off thousands of employees.
asserted
that → have → employees
(Though to be clear, hefty layoffs are still expected.)
asserted
layoffs → expect → ?
Since CEO David Ellison promised Bonta 30 movies a year and increased spending on content, there are fewer ways to reduce debt than is typical in prior big mergers.
asserted
Ellison → promise → mergers
Meanwhile, investors in the bonds were sitting on more than $100 million in paper losses on just the first day of trading.
asserted
investors → sit → trading
Much of the angst surrounding the deal has focused on the ramifications for Hollywood’s creative community.
asserted
Much → surround → community
But Wall Street has been fretting about the math.
asserted
Street → fret → math
After all, investors don’t care about winning Oscars.
asserted
investors → care → Oscars
They just don’t want to lose money.
asserted
They → want → money
The Aporia
