S&P Places Debt Ratings of Paramount and Viacom on Review

Strategic Insights -

The Standard & Poor's Corporation has warned that the $9.7 billion merger between Paramount Communications Inc. and Viacom Inc. could increase the risk for bondholders, prompting a review of the debt ratings of both companies. The credit agency has also expressed concerns about the potential downgrade of Blockbuster Entertainment Corporation, which is merging with Viacom to support its bid for Paramount. Meanwhile, QVC Network Inc., which lost out on the five-month bidding war for Paramount, has seen its debt ratings affirmed by S&P.

Key Takeaways:

  • The $9.7 billion merger between Paramount and Viacom may increase the risk for bondholders due to its reliance on debt financing.
  • The Standard & Poor's Corporation has placed the debt ratings of Paramount and Viacom on review for possible downgrade.
  • Blockbuster Entertainment Corporation, which is merging with Viacom to support its bid for Paramount, may face a potential downgrade of its debt ratings.
  • QVC Network Inc. has had its debt ratings affirmed by S&P after losing out on the bidding war for Paramount.
  • Heather Goodchild, director of corporate finance at S&P, noted that the deal was potentially risky due to the incentive to raise the bid with additional debt, despite the lack of detailed financial information.
  • Paramount's senior debt is rated single-A, subordinated debt A-, and commercial paper A-1.
  • Viacom's subordinated debt is rated BB+, and commercial paper A-3.
  • Blockbuster has a BBB- senior debt rating.

Statistics:

  • $9.7 billion: The value of the merger between Paramount and Viacom.
  • 5 months: The duration of the bidding war between Paramount and QVC Network Inc.
  • Single-A: The rating of Paramount's senior debt.
  • A-: The rating of Paramount's subordinated debt.
  • A-1: The rating of Paramount's commercial paper.
  • BB+: The rating of Viacom's subordinated debt.
  • A-3: The rating of Viacom's commercial paper.
  • BBB-: The rating of Blockbuster's senior debt.

Sources:

  • The New York Times, September [no date provided in the original text]
  • Heather Goodchild, director of corporate finance at S&P
  • Standard & Poor's Corporation
  • Paramount Communications Inc.
  • Viacom Inc.
  • Blockbuster Entertainment Corporation
  • QVC Network Inc.