Paramount Global's debt downgraded to junk status by Standard & Poor's Global

S&P Global has officially downgraded Paramount Global's debt rating to junk status at BB+, from BBB-, or one level below investment grade.

The credit rating agency made the move based on “weak credit metrics” with a stable outlook. The downgrade comes a month after Paramount was placed on negative watch by S&P Global for a possible credit rating downgrade due to weaker cash flow concerns as the major studio shifts from linear television to the streaming space.

“Paramount will need to implement its plan to significantly improve broadcast losses over the next two years to mitigate further downward rating pressure. Paramount's current credit metrics are weak for a 'BB+' rating,” S&P Global said in a commentary accompanying the debt rating downgrade.

The Shari Redstone-controlled media group is struggling to replace lost linear TV revenue with streaming and other digital revenue as it responds to rapidly changing consumer TV viewing habits. The rating agency dissolved its credit watch after Paramount Global, led by CEO Bob Bakish, disclosed fourth-quarter earnings on Feb. 28, 2024, in which Paramount+ reached 67.5 million subscribers and narrowed streaming losses to $490 million.

Last year, the studio's credit rating was downgraded from BBB to BBB — and additional downgrades were possible as S&P Global began evaluating cash flow along with leverage metrics when gauging the merit of Paramount's debt. The credit rating agency also offers cash flow metrics when measuring the broader US media sector.

The credit agency said it could lower Paramount Global's debt rating further if the studio is unable to reduce leverage and increase free operating cash flow over the next 12 to 18 months. Paramount Global is using NFL games to sign up new Paramount+ subscriptions, but those live sports rights are expensive.

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On February 13, the company revealed plans to cut an estimated 800 jobs as part of what Bakish called “cost simplification.” Paramount Global shares fell 30 cents, or nearly 3 percent, to $11.67 in late trading Wednesday.

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