- Law firm Milbank held a bondholder call Wednesday urging Warner Bros. Discovery creditors to sign a cooperation pact to jointly negotiate better terms in the company’s debt exchange ahead of a May 26 deadline.
- Warner Bros. is asking bondholders to swap existing debt into new junior notes secured by nearly all assets of the combined Warner Bros.-Paramount entity — but longer-dated bondholders receive no coupon increase for making the swap, sparking creditor resistance.
- Bondholders who refuse to participate will be left with claims against a shell company after the Paramount Skydance acquisition closes, creating significant pressure to accept suboptimal terms.
- Bankers are preparing a $49 billion debt sale to finance the Paramount takeover, with premarketing expected to launch within weeks, making resolution of the bondholder standoff time-critical.
What Happened?
Milbank, the law firm, held a call with Warner Bros. Discovery bondholders Wednesday to rally them into a coordinated negotiating bloc ahead of a May 26 deadline for a debt exchange that is a prerequisite for the company’s $110 billion acquisition by Paramount Skydance Corp. The exchange asks creditors to swap existing notes into new junior bonds secured by nearly all assets of the combined Warner Bros. and Paramount entity. While some shorter-dated bondholders receive a coupon increase, holders of longer-dated bonds get no such compensation — a disparity that has become a flashpoint. Creditors who refuse to participate face a worse outcome: their claims would sit against a shell company after the deal closes, effectively subordinating them without the protection the new structure offers. CreditSights recommended bondholders take the deal, citing the “substantial downside” for holdouts, while also noting the deadline — which includes the three-day Memorial Day weekend — was “designed to give noteholders little time to organize.”
Why It Matters?
The bondholder standoff is the last major financial obstacle between the current Warner Bros. Discovery structure and the completion of one of the largest media mergers in history. A $49 billion debt financing backing the Paramount acquisition is already in pre-marketing, and any creditor resistance that delays or complicates the exchange could create significant friction for the deal timeline. The Warner Bros. debt saga also illustrates a recurring pattern in large leveraged M&A: companies use tight deadlines, unfavorable alternatives, and the complexity of the creditor community to push through debt exchanges on terms that favor the acquirer. JPMorgan used the same five-day-window tactic when Warner Bros. split in half last year. Organized creditor resistance — as Milbank is now trying to assemble — is the primary check on that practice.
What’s Next?
The May 26 deadline is the critical near-term event. If Milbank succeeds in building a bondholder coalition before then, Warner Bros. and its advisers at Citi and Bank of America will face pressure to improve terms — likely a coupon increase for longer-dated bondholders. If the coalition fails to materialize in time, the exchange will likely proceed on current terms with holdouts left in an inferior position. Either way, the $49 billion acquisition financing launch is expected shortly after, making the debt capital markets trajectory of this deal one of the most consequential in the leveraged finance market this year.
Source: Bloomberg
