Time Warner Sells $3 Billion of Bonds in 3-Part Offering to Refinance Debt

Time Warner Inc. sold $3 billion of debt in a three-part offering as the owner of the Warner Bros. movie studio and the HBO cable channel tapped the corporate bond market for the second time this year.

The offering was divided evenly among 5-year, 10.5-year and 30-year securities, according to data compiled by Bloomberg. The 5-year debt yields 140 basis points more than similar-maturity Treasuries, the 10.5-year notes yield 175 basis points more than benchmarks, and the 30-year bonds pay a 215 basis-point spread.

Demand for bonds from companies such as Time Warner suggest “the investor base just has a tremendous amount of cash to put to work,” said Justin D’Ercole, head of investment-grade syndicate for the Americas at Barclays Capital, which led the underwriting of the issue.

New York-based Time Warner said in a prospectus filed with the U.S. Securities and Exchange Commission that proceeds will be used to repay debt and for general corporate purposes.

Time Warner’s sale follows a $2 billion issue in March, as the company extends debt maturities while rewarding shareholders through dividends and share repurchases. The company raised its quarterly payout to 21.25 cents a share from 18.75 cents in February, and boosted its share buyback program to $3 billion from $1 billion.

“The company continuously monitors the capital markets and chooses to access the markets when it determines favorable conditions exist,” said Keith Cocozza, a spokesman for Time Warner.

Retiring Debt

Time Warner will use the proceeds to redeem as much as $1 billion of 5.5 percent notes maturing in November 2011, $2 billion of 6.875 percent debt due in May 2012, and $1 billion of 9.125 percent notes dated January 2013, according to the prospectus and data compiled by Bloomberg.

“Maintaining a strong balance sheet, particularly in this environment of an uncertain global economy, is a strategic asset and is going to allow us to do everything that we choose to do on a go-forward basis,” Chief Financial Officer John Martin said in a May 27 presentation to investors.

Time Warner had $11.2 billion of outstanding public debt securities as of March 31, according to the prospectus.

The offering is Time Warner’s biggest debt sale since November 2006, when the company issued $5 billion of bonds in a four-part offering.

Previous Sale

Time Warner sold $1.4 billion of 4.875 percent, 10-year notes in March that paid 130 basis points more than similar- maturity Treasuries and $600 million of 6.2 percent, 30-year bonds at a spread of 162 basis points, Bloomberg data show.

Proceeds from the March sale were used to redeem Time Warner’s $1 billion of 6.75 percent debt maturing in April 2011, it said in a filing with the SEC.

Time Warner’s offering is rated Baa2 by Moody’s Investors Service and the company has an equivalent BBB from Standard & Poor’s.

Barclays Plc, Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. managed the sale, Bloomberg data show.

The average BBB rated bond maturing in 10 years or more yields 6.31 percent, according to Bank of America Merrill Lynch index data.

To contact the reporters on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net; Tim Catts in New York at tcatts1@bloomberg.net.

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