The Zhitong Finance App learned that J.P. Morgan said that high-rated bonds issued by SKYD.US (SKYD.US) on September 30 were then sold off, causing this batch of new bonds to lose the overall market to the highest level since the worst of the COVID-19 pandemic.
A strategist led by Nathaniel Rosenbaum wrote in a report released on Tuesday that as of October 8, the 10-day relative performance of new bonds was 27 basis points worse than the bonds in the bank's investment-grade index. This is the biggest gap in six and a half years. They added that if Sky Dance were excluded, the new debt would outperform by about 4 basis points.
The strategists said that this weak performance “is in line with a general pattern where the performance of new bonds has become increasingly difficult to predict since this year.” Therefore, investors need to consider “more carefully than in the past” the possibility that such bonds may outperform other high-rated securities, even though the market spreads are narrow.
According to J.P. Morgan Chase, this wave of weak new bonds triggered by Sky Dance helps explain why, despite strong capital inflows and declining interest rate volatility, last week's issuance volume was far lower than traders expected.
The strategists said that given the record amount of bonds issued in April 2020, and that the average interest rate spread for high-rated bonds in the JULI Index was 2.7 times that of today, “in comparison, last week's failure was much more serious.”
A brand new Hollywood giant
At the beginning of October, Paramount Sky Dance completed a huge $110 billion acquisition of Warner Bros. Discovery. After the merger, the new company was officially named Skydance “Skydance,” which also meant that a new Hollywood giant was born.
Paramount completed the key financing for this century-level media acquisition, but the higher capital costs also raised the operating threshold after the merger ahead of schedule. In just one week, the company completed the pricing and distribution of approximately US$52 billion in bonds and loans, including US$30 billion in investment-grade bonds, approximately US$12.4 billion in high-yield bonds and US$9.46 billion in loans.
The deal integrates film studios such as “Mission Impossible,” “Harry Potter,” and DC Pictures, as well as large TV and streaming networks such as CBS, CNN, Paramount+, and HBO Max to create a comprehensive entertainment company spanning the film, television, and news businesses.
The deal came to an end after nearly a year of turbulent competition, and further intensified the concentration of power in the Hollywood industry — currently dominated by a few large companies.
Several US state governments and the Hollywood Screenwriters Union have previously reached a settlement with the deal, removing the major legal barriers faced by one of the largest mergers and acquisitions in the history of the media industry. The merger comes at a time when Hollywood is facing multiple pressures, including the continued loss of cable TV subscribers, the high cost of competition for streaming users, and continued pressure from trade unions over employment and creative workers' rights.
Sky Dance CEO David Ellison said last week that the reason for choosing the name Sky Dance was to preserve the respective brand identities of the two major film studios, Paramount and Warner Bros., rather than integrating them under a new brand.