Deals: Time Warner Rights Plan Welcomed by Lenders

Time Warner Inc.'s plan for raising as much as $3.5 billion in a rights offering won plaudits from the media giant's bankers after the plan was unveiled on Thursday.

The issuer will use most of the proceeds from the offering to prepay some of the $9.8 billion borrowed in 1989 to help finance the $14 billion merger of Time Inc. and Warner Communications Inc.

Bankers Trust Co. and Manufacturers Hanover Trust Co. led the bank group that provided the loans.

Improvement in Timing

In what turned out to be a bitter pill for the banks to swallow, they were forced to reclassify the loans as highly leveraged transactions in 1990, following the issuance of guidelines by federal regulators on what constitutes an HLT.

By HLT standards, the Time Warner loans are thinly priced.

Assuming the rights offering is successful, though, the addition of fresh equity on Time Warner's balance sheet should hasten the day when the banks can delist the loans as HLTs.

One banker expects the loans to be delisted by January 1992.

Meanwhile, the rights offering "should not require any amendment to the [bank] loan documents whatsoever, which banks view as very positive," a member of Time Warner's bank group said.

Revolving Credit to Be Paid

The company is expected to use the proceeds to repay a portion of the amount drawn on its revolving credit line rather than its term loan.

Time Warner must repay the $4.3 billion term loan by March 31, 1993.

Funds to pay off the term loan are expected to come from excess cash flow, discretionary asset sales, and cash from outside partners in possible Time Warner joint ventures.

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