Time Warner Offers $1 bn Debt


Time Warner Inc. (TWX), the diversified media conglomerate, recently announced the sale of $1 billion debt through notes and debentures. The new debt is divided into two parts -senior notes due 2022 and senior debentures due 2042.

The issue, with a guarantee of Historic TW Inc., is of $500 million senior debts at 3.4% with a price of 99.857% of their face value, carrying a due date of 2022 and of $500 million senior debts at 4.9% debentures at a price of 98.929% of their face value with a due date of 2042.

Further, the obligation of Historic TW Inc. is guaranteed by Home Box Office Inc. and Turner Broadcasting System Inc. The offering is expected to close on June 13, 2012.

The announcement reflects the company’s strategic approach to utilize the amount from the offering for common business purposes while boosting shareholders’ return through share repurchases and business expansion.

Borrowing costs have gone down significantly, marking a record low, and in turn, facilitating companies to obtain easy financing at compelling prices. Besides, corporate bonds are in high demand as U.S. treasuries are yielding low rates, driving investors toward the bonds issued by sound companies.

Earlier in October 2011, the company had issued $500 million senior debts at 4% with a price of 98.297% of their face value, carrying a due date of 2022 and $500 million senior debts at 5.375% debentures with a price of 99.366% of their face value and a due date of 2041.

Time Warner’s significant international presence has helped broaden its client base and product portfolio. The company operates in the UK, Germany, Canada, France, Japan and other countries apart from the U.S. We believe that the company’s strong international exposure will boost its growth in the coming quarters.

Currently, we have a long-term ‘Neutral’ rating on the stock. Moreover, Time Warner competes with News Corporation (NWSA) and Walt Disney Company (DIS), and has a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.

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