A coalition of 12 states led by California is suing to block Paramount’s (PARA) $81 billion acquisition of Warner Bros. Discovery (WBD) — the biggest obstacle yet for a deal that would combine two of Hollywood’s largest producers of entertainment and news.
The states argue the pact risks harm to consumers. Paramount says the suit should be dismissed as a misrepresentation of competition. But the lawsuit lands on top of the $80 billion debt pile at 6.5x leverage we flagged on July 10, with long bonds already trading at 8.43%.
When a deal carries 6.5 turns of leverage and twelve attorneys general, you are underwriting a lawsuit and a bond covenant, not a media company.
So PARA and WBD stay avoided — unchanged since July 10, now with a second reason. If it closes and generates free cash flow, we can buy it then — cheaper, and with a verdict in hand.
PARA and WBD stay avoided — unchanged since July 10, now with a second reason. A deal carrying 6.5 turns of leverage and twelve attorneys general is a lawsuit and a bond covenant wearing a media company’s logo. The bond market already graded this slideware a C-minus at 8.43%; the states just asked for a re-grade. If it closes and generates free cash flow, we buy it then — cheaper, with a verdict in hand.