Welcome to Skydance! Movies, TV ... and Massive Debt

Matt Belloni (0:05)

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It is Wednesday, October 7th. It finally happened. As of yesterday, Paramount and Warner Brothers Discovery are now Skydance. They predicted that name on this show, and you can see it in Burbank. The WB Water Tower now says, A Skydance Corporation. I'm in New York this week. The offices of CNN and the old HBO building, both have the Skydance branding on them. Kudos to whoever stayed up all night for that one. Yesterday, David Ellison and his executive team made the rounds in a town hall and a media get-together, and they're here in New York. Tomorrow, they'll ring the bell on the stock exchange. What they're not talking about, at least not when they can avoid it, is the massive debt bomb that is hanging over this company. The complicated financing that led to this media behemoth, it saddled this company with nearly $80 billion in debt on day one. And that debt is going to influence every aspect of how this mega studio and mega streamer is run. Remember, paying down debt was a big focus of the previous ownership. So much they decided to sell the whole thing when the economics of the TV business turned out to be weaker than they envisioned. Skydance is a bit different. It has all that Larry Ellison money backing it, as well as the Middle East money. And they sold a bunch more in debt this week. But interest rates have been going up, which the Journal reported will add $400 million in interest costs to the company every year. It's a lot of movies and TV shows they could have been making. Or does any of this matter? Ellison and his co-CEO Enon Kreitz, who came over from Mattel, they say they have a plan for this financial tightrope. They can make it all work. Others are more dubious. Fitch, the ratings agency, they downgraded Skydance because of those fears. And as of today, the company's newly traded stock has dropped more than 10% since its debut just a couple days ago. So today we're going to get into that. Skydance Financials with Rich Greenfield, the analyst from LightShed Media. A usual disclosure when we talk about Skydance, one of its backers, Redbird Capital, is a big investor in Puck where I work. Today it's the Skydance Financial tightrope. All that debt, and could Hollywood's new mega studio come crashing down? From the Ringer and Puck, I'm Matt Belloni, and this is The Town.

OK, we are here with Richard Greenfield, the analyst from LightShed Media, returning champion to The Town. It's been a while, Rich, has it not?

Rich Greenfield (4:02)

You know, it's been a little bit.

Craig Horlbeck (4:04)

We took a little break.

Matt Belloni (4:05)

We took a little break as this all unfolded, and I was more focused on whether this deal would get done. But now it is done. This behemoth of a media company exists. It is trading publicly, although the stock isn't doing so great so far. And I wanted to have you on because we need to get into the financials of this new company. I don't think people in Hollywood and elsewhere really understand the tightrope that this company is walking. We knew about it with Warner Brothers Discovery. We knew that the financial projections of the television business almost immediately did not add up. And they looked at a pretty pricey debt price tag on that deal, $50 billion that they were constantly trying to pay off.