Skydance faces massive debt challenge after $110 billion Warner Bros. merger

David Ellison’s Skydance completed a $110 billion purchase of Warner Bros., relying on roughly $24 billion from Middle-Eastern sovereign investors, additional capital from RedBird Capital, family contributions and a $42.4 billion bond issuance. The merged entity now faces a steep debt-to-earnings ratio that must be met by 2028, a goal S&P Global’s Naveen Sarma says is unlikely without bridging a $10-15 billion gap, possibly through more equity from Larry Ellison.

A California antitrust lawsuit and a Writers Guild of America dispute delayed closing, during which Treasury yields rose, adding an estimated $500 million per year in financing costs. Skydance expects to generate positive cash flow only after 2028 and has projected $6 billion in cost-saving synergies, though large layoffs remain probable. Bond investors recorded over $100 million in paper losses on the first trading day, reflecting Wall Street’s concern over the deal’s financial math.