Massive debt-fueled deals are back on Wall Street

Paramount's $77.9 billion bid for Warner—backed by $54 billion in debt—is making some bond investors queasy

- Matt Wirz & Ben Glickman

Big-ticket mergers and acquisitions, or those valued at $10 billion or more, hit a record dollar amount this year.

(BLOOMBERG)

The megadeal is back and so is Wall Street's immense appetite for debt.

Paramount's hostile bid for Warner Bros. Discovery this week, the leveraged buyout of gaming company Electronic Arts earlier this year and other recent debt-laden transactions have all been possible thanks to a spike in lending by banks and even some private-credit funds.

Big-ticket mergers and acquisitions, or those valued at $10 billion or more, hit a record dollar amount this year, according to Dealogic. Much of the price tag on those deals gets paid for with debt.

Debt-heavy deals mean large paydays for shareholders but also more risks for bond investors when credit markets are showing signs of overexuberance. And would-be acquirers have more choices than ever: The corporate-bond, syndicated-loan and private-credit markets are all whirring at the same time.

“These big, bolder bets are becoming more interesting, and people are willing to try them because of the financing that’s available,” said Matthew Toole, director of deals intelligence at the London Stock Exchange Group.

Expectations that the Trump administration will be more accommodating to large tie-ups are also pumping the size of deals up to record levels. Paramount's offer for Warner included $54 billion in committed debt financing from Bank of America, Citigroup and the investment firm Apollo Global Management. Netflix’s featured $59 billion, backed by Wells Fargo, BNP Paribas and HSBC.