Shari Redstone’s National Amusements (NAI), the majority voting shareholder of Paramount Global (NASDAQ:PARA), announced yesterday that it secured a $125 million preferred equity investment from BDT Capital Partners, an affiliate of the merchant bank BDT & MSD Partners.
Paramount shares gained 4.7% on the news as NAI likely won't have to sell or pledge shares in Paramount.
“The investment will position NAI for sustainable growth and further post-pandemic recovery in its underlying operations as movie theatre attendance continues to increase. This includes strengthening NAI’s balance sheet by enabling it to reduce interest expense and pay down its revolving loan and recent term loan borrowings,” the company said in a press release.
“Upon termination of those facilities, NAI shares of Paramount Global which had been pledged to support those loans will be released back to NAI, and obligations to make future pledges under these facilities will be eliminated.”
Paramount shares fell sharply after the company announced that it would be cutting its dividend, which is a key source of income for NAI.
The Wall Street Journal reported that the merchant bank is receiving warrants to purchase 3.5M shares of PARA nonvoting stock from NAI at a strike price of $15.
Loop Capital analysts upgraded shares to Hold from Sell with a price target of $14.00.
"While we are still concerned with the level of negative free cash flow, the declining traditional business, and our view that Paramount+ is at best the number four or number five streaming company, we no longer believe the downside is that much greater than the upside, so we are upgrading our rating," the analysts said in a note.