Time Inc. to Raise $1.4 Billion in Debt for Spinoff

Time Inc., the publisher of People and Time magazines, said it will raise $1.4 billion in debt as part of its planned spinoff from Time Warner Inc. (TWX) this year.

Time Inc. said it will use the proceeds to fund the acquisition of the U.K. publishing business, which is currently owned by a unit of the parent company, according to a statement today. Any remaining funds will be used to pay a special cash dividend to Time Warner, a tactic also used when the New York-based company split off Time Warner Cable Inc.

Time Inc., the worst-performing unit of Time Warner, is facing a decline in print-advertising revenue and newsstand sales as more readers move online. Time Warner has said the separation of the publisher of Sports Illustrated and Fortune is expected to be completed by the end of June.

Based on Time Warner’s projections that Time Inc. will have net debt of about $1.3 billion, raising $1.4 billion of debt means the new company will have about $100 million in cash.

The division is raising the money through an offering of unsecured senior notes and by entering into a secured term loan facility. The unit wants $900 million of financing in the form of a so-called term loan B, a type of debt typically sold by companies with speculative-grade ratings, Bloomberg News reported yesterday, citing a person with knowledge of the deal.

Photographer: Ron Antonelli/Bloomberg

The Time Warner Center building stands at Columbus Circle in New York. Close

The Time Warner Center building stands at Columbus Circle in New York.

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Photographer: Ron Antonelli/Bloomberg

The Time Warner Center building stands at Columbus Circle in New York.

Time Warner, which also owns HBO and the TBS and TNT cable networks, rose 0.7 percent to $65.26 at the close in New York today.

To contact the reporters on this story: Sarah Rabil in New York at srabil@bloomberg.net; Edmund Lee in New York at elee310@bloomberg.net

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net James Callan

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