Paramount Global Credit Rating Cut To Junk Status By S&P Due To “Downside Ratings Pressure” On Its TV Business

Dade Hayes
·3 min read
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Paramount Global’s credit rating has been lowered to junk status by S&P Global, which cited the toll of ongoing pay-TV declines as a key factor in the downgrade.

The company said Wednesday it dropped Paramount’s rating to BB+ from BBB- due to the “accelerating declines in linear media and the shift toward a more competitive and less certain streaming model.”

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S&P warned a month ago that a downgrade would be possible due to adjustments it was making to its ratings evaluation metrics.

While the company’s debt levels are decreasing by some measures, S&P’s latest report acknowledged, Paramount’s ratio of free operating cash flow is not reason for optimism. The ratio is forecast to come in well below 10%, a key threshold, “even as streaming losses significantly abate over the next two years.” The media company “will need to execute its plan to substantially improve streaming losses over the next two years to mitigate further downside ratings pressure,” the report added.

The news comes as speculation continues to swirl about the future of Paramount, which began 2024 as the most likely company in the media sector to be part of a major M&A transaction. The company has been in austerity mode, reducing its workforce and selling off non-core assets like real estate holdings and book publisher Simon & Schuster. Paramount’s controlling shareholder, Shari Redstone, has fielded multiple offers and expressions of interest from private investors and others looking to acquire some or all of the company.

One positive, the S&P report noted, is its assumption that “streaming losses will improve by more than $700 million due to strong average revenue per user (ARPU) growth from price increases enacted in mid-2023 and ongoing, albeit more modest, subscriber growth.” The linear TV operation could also stabilize, the report added, given that the company will reap a windfall from political advertising this year and is part of the Super Bowl rotation as a long-term NFL rights holder.

Nevertheless, S&P added, “If these assumptions don’t materialize to the extent we are forecasting due to a more competitive streaming environment or an acceleration in declines in linear television, we could reassess our rating or outlook.”

Paramount stock climbed 3% Wednesday to close at $11.70, though it is still a fraction of where it was when the merger of Viacom and CBS closed in 2019. (The merged company later rebranded as Paramount Global.) Several of the offers for parts of Paramount’s portfolio, or the entire company, have come in well above its current market value of $8 billion. Apollo Global Management has reportedly said it would pay $11 billion for the company’s film and TV studio operation. Hiving off that part of the company is reportedly a non-starter for Redstone, who has viewed Paramount Pictures as a cornerstone of the company.

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