TMT Credit Research: PSKY Credit: Sequel Pushed to 2027

Research evidence excerpt

M

Update

August 5, 2026 12:52 AM GMT

Morgan Stanley & Co. LLC

TMT Credit Research | North America

David M Hamburger

Credit Analyst

PSKY Credit: Sequel Pushed to

2027

Juliana Gonzalez

Credit Analyst

See our prior notes:

- PSKY/WBD Credit: Game of Liens – Closing

Key Takeaways

PARA Front-End Buy Recommendation (26 May

Antitrust trial set for March 2-19, 2027, later than PSKY's preferred Nov. 2026

2026)

timing but closer to what state AGs sought. We believe this reinforces the need

- WBD Credit: EBITDA Euphoria, FCF The Pitt (7

for a settlement and suggests AGs have negotiating leverage, PSKY CEO Ellison

May 2026)

stated the co. is "open to finding a solution out of court."

- PSKY Credit: Capital Structure Still in

Financing "locked in," per Ellison; ticking fee (~$650mn/qtr) will be equity-funded

Production (5 May 2026)

at close, new disclosure; bridge carries ~$8-9mn/month + a June '27 commitment

- PSKY/WBD Credit: A High-Yield Script with

fee, totaling ~$190mn if the deal closes by the 6/2/27 outside date.

Investment-Grade Aspirations (20 Mar 2026)

Beat-and-raise print; FY26 Adj. EBITDA raised to $3.8-3.9bn, FCF conversion guide

doubled to 10%+, '26 run-rate synergy target raised to $2.7bn (from $2.5bn),

- WBD/PSKY Credit: Bonds in a 'Sub-Liminal'

State (6 Mar 2026)

- WBD/PSKY Credit: Leverage Is Paramount (27

tracking toward the $3bn+ target.

Feb 2026)

Net lev 3.4x, vs. 3.7x in 1Q26; no substantial '26 maturities; cash $1.6bn, $1.8bn

- WBD/PSKY Credit: One Battle After Another

revolver drawn (down from $2.15bn draw used for NFLX termination fee in 1Q),

(26 Feb 2026)

$3.2bn undrawn capacity sufficient through extended timeline.

- WBD/PSKY Credit: Back to the (Sky)Dance

Co. expects accelerating DTC growth (sub+ad) and continued Studios growth in

Floor (13 Feb 2026)

2H; TV Media declines to moderate on easier comp; DTC margins step down in

- WBD/PSKY Credit: The Sky's the Limit? (12 Dec

3Q on content amortization timing before improving in 4Q.

2025)

120

100

PARA and WBD curves

PARA 4⅜ '43 - WBD 5.05 '42 spread diff.

PARA 4.95 '50 - WBD 5.141 '52 spread diff.

PARA 4.2 '32 - WBD 4.279 '32 spread diff.

WBD 5.141 '52 - WBD 4.279 '32 spread diff.

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