(Bloomberg) — While Paramount Skydance Corp. and Oracle Corp. are entering the ranks of America’s biggest borrowers, their ties to the same man – billionaire Larry Ellison – are beginning to spark angst on Wall Street.
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The assumption among many investors was that Ellison would step in to support Paramount if it ran into financial difficulties after taking on $52 billion in additional debt this week to help pay for its acquisition of Warner Bros. Discovery Inc. But with much of the Ellison family’s wealth tied up in Oracle stock as the company undertakes its own capital-intensive AI development, the fear is that the value of that safety net could come under pressure just when Paramount needs it most.
These concerns are already being reflected in the market, fund managers say. The cost of insuring the two companies’ debt against default has converged and is moving increasingly in parallel, a sign that investors are beginning to view the two credits as closely linked. That’s another factor lenders need to consider when assessing companies’ growing leverage and execution risk, according to Campe Goodman, portfolio manager at Wellington Management Co.
“You have to look at your total risk Larry Ellison,” Goodman said, adding that investors should view Oracle and Paramount as linked bets rather than completely separate credits. “You’ll probably want to consider your exposure to both.”
Representatives for Paramount and Oracle did not respond to requests for comment. Attempts to reach Ellison through his foundation also went unanswered.
Ellison, 82, supports Warner Bros. buyout by Paramount, led by his son David, through a family trust that guaranteed a significant portion of the deal’s approximately $47 billion in equity financing.
But its support also extends beyond the acquisition itself. While Paramount worked to reassure ratings companies about the debt burden the combined company would carry, the Ellison family pledged to take whatever steps were necessary to help reduce debt in the coming years — a commitment that credit raters and investors took as a tacit promise to inject additional capital if necessary.
This makes Ellison’s ability to fulfill its commitment a key consideration for creditors.
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