Credit Memo

Executive Summary

Paramount Skydance Corporation (“PSKY”) has agreed to acquire 100% of the shares of Warner Bros. Discovery (“WBD”) for US$31.00 per share in cash (the “Acquisition”), valuing WBD at an enterprise value of c.US$110bn, equal to 7.5x fully synergised 2026 EBITDA. The agreement was signed on 27 February 2026 and is expected to close in Q3 2026, subject to the remaining regulatory clearances. We are the lead arranging team on the acquisition financing and seek Credit approval for our participation, set out below.

• The Acquisition is funded by c.US$47bn of new Class B equity from the Ellison Family and RedBird Capital Partners (the “Equity Investors”), including a c.US$45.7bn commitment from the Ellison Trust guaranteed personally by Larry Ellison (the “Ellison Guarantee”), together with debt commitments of c.US$54bn led by Bank of America, Citigroup and Apollo, reduced to c.US$49bn on syndication to eighteen lenders in April 2026.
• The debt is committed and is not subject to any financing condition. The c.US$49bn senior secured bridge facility (the “Bridge Facility”) is to be refinanced into permanent first-lien term debt of c.US$39.5bn and second-lien term debt of c.US$12.4bn before close.
• Our participation is in the first-lien term facility (the “First Lien Facility”), which carries issue ratings of BBB-/Baa3/BBB-, above the PSKY issuer ratings of BB+/Ba1/BB+. Indicative pricing on the dollar tranche is 6.75% to 7.01%.
• The US Department of Justice cleared the Acquisition on 12 June 2026 with no divestitures or remedies. Reviews in the European Union, the United Kingdom, the FCC foreign-ownership petition, and possible US state attorney-general action remain outstanding, and funding is conditioned on the remaining clearances.
• The transaction opens above the bank's total leverage ceiling of 5.0x and below the interest cover floor on a pre-synergy basis. Under Section 6 of the credit policy, any breach of a risk-appetite limit requires Credit Committee approval with a documented rationale, and the size of our exposure additionally requires Board Risk Committee approval. The documented rationale is set out in this paper and summarised in the Conclusion.

We hereby request Credit approval to:

• Underwrite US$2.0bn of the First Lien Facility.
• Take and hold US$750m following primary syndication, with any amount above US$750m distributed before close.
• Approve the Acquisition financing notwithstanding the breach of the total leverage ceiling of 5.0x and the interest cover floor, on the documented rationale set out in this paper and subject to the conditions in the Conclusion.

Approved Limits

• The Underwrite of US$2.0bn is the peak exposure between commitment and syndication. The Final Hold of US$750m is the target exposure after primary syndication, with any excess distributed before close.

Business support for the transaction has been received from [Name], Global Head of Leveraged Finance; [Name], Head of Media and Telecommunications Coverage; and [Name], Head of Debt Capital Markets.

Transaction Summary

Total Transaction Sources & Uses (US$bn)

Indicative and drawn from public sources, stated on a new-money basis. Assumed WBD debt of c.US$33bn remains within the structure and is excluded from the table. Pro forma gross debt of the combined group is c.US$79bn to c.US$87bn. The full Sources and Uses is pending the funds flow and the fee letter.

Pre-Transaction Structure

PSKY is the listed acquisition vehicle formed by the 2024 merger of Skydance Media into Paramount Global, controlled by the Ellison Family and RedBird. WBD is a separately listed group holding the Warner Bros. film and television studios, HBO and HBO Max, and the Discovery linear networks including CNN, TNT, TBS and HGTV. Existing debt sits at both PSKY (Paramount Global) and WBD, with WBD carrying c.US$33bn of existing debt.

Rationale

Acquisition of WBD

• PSKY acquires 100% of WBD for US$31.00 per share in cash, the final level in a contested process that began with mixed cash-and-stock approaches in September 2025 and included a competing Netflix proposal for WBD's studio and streaming assets, which was withdrawn on 26 February 2026.
• The combination brings together the Paramount and Warner Bros. studios, the Paramount+ and HBO Max streaming services, and the two groups' linear networks, forming a global studio and streaming group.

Equity and the Ellison Guarantee

• New Class B equity of c.US$47bn is provided by the Equity Investors, with the c.US$45.7bn Ellison Trust commitment guaranteed personally by Larry Ellison. The equity was syndicated in April 2026 to a group including Saudi Arabia's Public Investment Fund, the Qatar Investment Authority, Abu Dhabi's L'Imad and LionTree, with the three Gulf funds committing c.US$24bn in aggregate. Shares issued to the syndication parties are non-voting, and the Ellison Family and RedBird retain the controlling voting bloc.

Debt commitment and syndication

• Debt commitments of c.US$54bn were provided by Bank of America, Citigroup and Apollo, reduced to c.US$49bn on syndication to eighteen lenders in April 2026. The Bridge Facility is a 364-day senior secured facility to be refinanced into the permanent first-lien (c.US$39.5bn) and second-lien (c.US$12.4bn) term debt. A US$10bn pro rata package of senior secured Term A facilities and a revolving credit facility was put in place alongside.

Deal protections

• The Acquisition carries a US$7bn regulatory termination fee payable by PSKY if the deal is blocked on regulatory grounds, and a US$0.25 per share quarterly ticking fee accruing to WBD shareholders if closing runs past 30 September 2026. The definition of a material adverse effect excludes the performance of WBD's linear networks, and the financing is not subject to a financing condition.

Transaction Flow

On completion, the merger sub merges into WBD, with WBD surviving as a wholly owned subsidiary of PSKY. The new equity and the new secured debt fund the purchase of WBD's shares and the refinancing of WBD's existing bridge facility. Our exposure is to the First Lien Facility at the PSKY level, secured on a first-lien basis over substantially all US assets of PSKY, Paramount Global, Skydance Media and, post-close, WBD.

Funds Flow Steps

• The Equity Investors subscribe c.US$47bn of new Class B equity into PSKY.
• The lenders advance the new first-lien and second-lien secured term debt to PSKY.
• PSKY pays WBD shareholders US$31.00 per share in cash for 100% of the WBD shares.
• PSKY refinances WBD's existing US$15bn bridge facility.
• The merger sub merges into WBD, which survives as a wholly owned subsidiary of PSKY.

Financial Summary

The Base Case follows management's guidance at signing. The rating agencies count synergies only as realised, which produces materially higher opening leverage than management's synergised figure. The figures below are drawn from public sources and the company's filings, and a full financial model is pending; the projection tables will be completed on receipt.

Key assumptions:

i. Synergies: Management expects over US$6bn of run-rate synergies, c.30% realised in the first year after close and c.70% by the second, from technology integration, procurement, real estate and operational efficiencies.

ii. Leverage and deleveraging: Management guides to net leverage of 4.3x on a synergised basis at close, against agency estimates of c.7.6x (S&P) and the low-7x range (Moody's) for 2026 on an unsynergised basis. Gross pro forma debt is c.US$79bn to c.US$87bn. The Equity Investors have committed to a path below 3.75x net by FY2028 and 3.0x by FY2029.

iii. Linear decline: The Discovery linear networks are projected to decline c.22% in EBITDA from 2026 to 2027, with continued double-digit declines thereafter, partly offset by growth in streaming and studios.

Summary metrics

A full Summary P&L, cash flow and credit-metrics projection is pending the financial model.

Position against credit policy

The bank assesses leverage conservatively, on a gross unsynergised basis, consistent with Section 3.3 of the credit policy, which does not give credit for aggressive add-backs to EBITDA. On that basis total leverage and interest cover breach the policy at open. The equity-contribution test is comfortably met. The breach is one of opening leverage and the time taken to deleverage, with committed equity ranking ahead of our exposure.

Equity contribution measured as new equity of c.US$47bn against enterprise value of c.US$110bn.

Sensitivity and Scenario Analysis

• Stress case: half of the targeted synergies realised, c.US$3bn against the c.US$6bn target, and linear decline running ahead of plan. Under this case deleveraging slows materially and the group remains above the 5.0x ceiling beyond FY2028.
• The stress does not threaten the first-lien position, which benefits from the security package, the equity beneath it and the second-lien debt. It extends the period the exposure sits outside appetite.
• Flexibility levers in the stress case: deferral of discretionary capex, a pause on shareholder distributions while leverage is above the covenant level, and working-capital release.
• A full breakeven on synergy realisation and the linear trajectory is pending the financial model.

Scenario Analysis

Base Case per management guidance and the Equity Investors' stated commitments. Stress Case is illustrative and pending the financial model.

Conclusion

We are comfortable with the proposed terms of the transaction given:

• Our exposure is first-lien senior secured, with issue ratings of BBB-/Baa3/BBB- above the PSKY issuer ratings, and benefits from a security package over substantially all US assets of the group.
• Committed equity of c.US$47bn, including the c.US$45.7bn Ellison Trust commitment guaranteed by Larry Ellison, ranks behind our exposure and sits at c.43% of enterprise value, well above the 35% floor.
• Our final hold is limited to US$750m after primary syndication across eighteen institutions, and the dollar tranche carries six months of soft-call protection.
• The financing is committed and not subject to a financing condition, and the permanent first-lien and second-lien term debt is already being placed.
• The US Department of Justice cleared the Acquisition on 12 June 2026 with no remedies, and funding is conditioned on the remaining clearances, so our commitment is not drawn unless the deal can close.
• The Equity Investors have committed to a deleveraging path of below 3.75x net by FY2028 and 3.0x by FY2029, which we recommend be reflected in a leverage covenant and milestones.

Conditions of approval

• Final hold not to exceed US$750m, with any excess syndicated before close.
• Confirmation of the permanent financing terms and our final allocation before commitment.
• A leverage covenant and deleveraging milestones consistent with the Equity Investors' stated deleveraging path.
• Regulatory clearance as a condition to funding.

Residual risk accepted

The exposure opens above the total leverage ceiling and below the interest cover floor on a pre-synergy basis, and the return to within-appetite leverage depends on synergy delivery and the trajectory of the linear business. We state this plainly rather than netting it against the mitigants, in line with Section 4 of the credit policy. This is the documented rationale required under Section 6 for the breach of a risk-appetite limit, on which Credit Committee and Board Risk Committee approval is sought.

Appendix 1: Summary of Terms

Appendix 2: Management and Board

Leadership Team

David Ellison, Chairman and Chief Executive Officer, PSKY: Founder of Skydance Media, which merged with Paramount Global in 2024 to form PSKY. Leads the combined group.

Chief Financial Officer and other named executives: To be confirmed from the management presentation.

Key Board Composition

Larry Ellison, equity provider and guarantor: Co-founder of Oracle Corporation. The Ellison Trust provides the c.US$45.7bn equity commitment under the Ellison Guarantee.

RedBird Capital Partners, equity investor: Founded by Gerry Cardinale. Co-backer of the equity alongside the Ellison Family, retaining a voting interest with the Ellison Family.

David Zaslav, WBD Chief Executive: Leads WBD through to completion and is expected to depart on close.

Full structured bios (nationality, tenure, prior employer scale and holdings) are pending the management presentation.