Paramount completed a $52 billion debt sale on Wednesday, the largest single-day corporate bond offering ever, but it paid a steep price due to rising interest rates. Finance chief Dennis Cinelli acknowledged paying more interest, saying, "We are. But we’d much rather get the deal done and then manage that accordingly." The sale was needed to fund its Warner Bros. Discovery acquisition before a Sept. 30 deadline.
The Federal Reserve's first rate hike in three years and a sharp government bond selloff pushed the 10-Year Treasury yield near a 24-year high, with yields posting their steepest quarterly increase since 1994. Paramount would have saved roughly $400 million in annual interest had it sold the debt months earlier, though it hedged some exposure. It will pay interest as high as 9.1% on bonds maturing between 2028 and 2066.
The deal showed markets can absorb huge debt, but wild yield swings and AI-related borrowing are raising costs for even top-rated companies like Meta Platforms. Analysts note rates-related pain in capital-intensive industries outside the AI trade. Investors placed orders for $150 billion of Paramount debt, nearly tripling the amount offered, according to Citigroup's Leon Kalvaria, who ran the sale with Bank of America. Still, first-day trading was rocky, with some junk-rated notes dropping to 96 cents on the dollar.
Despite the volatility, money managers are locking in attractive rates not seen since the 2008-09 financial crisis. Kalvaria said, "Markets always have choppy days, and you have to take a long-term view. We had great execution in a volatile market and now the company has its long-term capital."
Source: Wall Street Journal Markets · Summarized by HeadlinesBriefing