By Medha Singh and Chibuike Oguh
NEW YORK (Reuters) - Shares of Paramount Global rose by more than 6% on Friday after its controlling shareholder, media mogul Shari Redstone's National Amusements Inc, announced it had received a $125 million investment from a private equity firm.
National Amusements said it had agreed a $125 million preferred equity investment from BDT Capital Partners to help the U.S. movie theater operator cut its interest expense and pay down borrowings, according to a statement on Thursday.
BDT Capital Partners, which is a private equity firm backed by Dell Inc founder Michael Dell and billionaire investment banker Byron Trott, will be issued warrants to purchase 3.5 million of Paramount Global's non-voting shares owned by National Amusements at a strike price of $15 as part of the deal, the Wall Street Journal reported.
"The bull case is that the financial pressure will force PARA [Paramount Global] to find a buyer and shareholders will achieve private market value," Loop Capital analysts said as they upgraded the stock to "hold" from "sell".
Paramount Global shares, which have lost 12% year-to-date, rose 6.1% and were trading at $14.94 around noon on Friday.
Earlier this month, Paramount Global, one of National Amusements' biggest assets and its main cash cow, missed first-quarter revenue estimates and cut its dividend by 80% in an effort to save approximately $500 million, prompting multiple analysts to downgrade the company's target stock price.
Paramount Global has been looking to sell some its assets to raise capital amid a weak advertising market that has hit its TV business. The company is considering the possible divestment of its majority stake in BET Media Group and it is attempting another sale of book publisher Simon & Schuster, Reuters reported.
(This story has been refiled to clarify reference to BDT Capital Partners in paragraph 3)