A Paramount Twist & Trump's Meme Windfall Options

It’s an ironic twist, for sure, that the best news Shari Redstone has gotten since she decided to sell Paramount Global arrived last week in the form of a credit downgrade. On the surface, of course, it is bad news indeed that S&P Global relegated the company’s $14 billion of net debt to junk bond status, which scares off investors and drives up borrowing costs. But there is a strange silver lining here for Shari, which might make it easier for her to sell National Amusements Inc., the Paramount parent company, to David Ellison, the scion of tech billionaire Larry Ellison and founder of Skydance Media, who now wants Paramount, too.

As I first reported back in December, any attempt to seize Paramount Global through NAI risks triggering the so-called “change-of-control” provision in Paramount’s $11.2 billion of senior debt, which would immediately come due if the three big Wall Street ratings agencies downgrade Paramount into junk territory, the lowest rung of investment-grade debt. More specifically, the trigger generally applies to financial buyers, such as KKR and Blackstone, rather than to strategic buyers, such as Apple or Amazon, for which an acquisition of Paramount would come out of petty cash.