Bloomberg News

Time Warner Sells $1 Billion Bonds at Record Low Coupons

June 08, 2012

Time Warner Inc. (TWX:US), the owner of the Warner Bros. movie studio, raised $1 billion in a two-part offering at its lowest coupons on record, according to data compiled by Bloomberg.

The company sold $500 million of 3.4 percent 10-year notes that yield 180 basis points more than similar-maturity Treasuries and an equal amount of 4.9 percent 30-year bonds with a 225 basis-point spread, Bloomberg data show. Both spreads are lower than initial talk of about 200 and 245 more than Treasuries, according to a person familiar with the offering who asked not to be named, citing lack of authorization to speak publicly about the sale.

“Time Warner has performed well of late on the strength of its cable networks and solid results from its film and television studio,” Michael Hodel, a credit analyst at Chicago- based Morningstar Inc., wrote today in a note. “A big reason we’d hesitate to chase Time Warner here -- in addition to generally tight spreads -- is that the firm has placed a heavy emphasis on shareholder returns.”

Proceeds from the sale will be used for general corporate purposes, according to a regulatory filing by New York-based Time Warner.

The company last sold bonds Oct. 12, when it issued equal $500 million portions of 4 percent, 10-year notes at 98.3 cents on the dollar to yield 200 basis points more than similar- maturity Treasuries and 30-year, 5.375 percent bonds at 99.37 cents with a 225 basis-point spread, according to data compiled by Bloomberg. Those coupons were the company’s previous lows for 10- and 30-year debt.

Share Repurchases

The 10-year bonds rose to 105.97 cents on the dollar to yield 3.27 percent at 11:17 a.m. in New York today, and the 30- year debt traded at 105.9 cents to yield 4.99 percent at 2:47 p.m., according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.

The company, which has $18.8 billion of bonds outstanding (TWX:US), reported first-quarter earnings May 2 that beat analysts’ estimates on TV-advertising gains. Time Warner has repurchased about $7 billion of its shares in the last 12 months, boosting its ratio of debt to earnings before interest, taxes, depreciation and amortization to 2.82 in the first quarter from 2.63 a year ago, according to data compiled by Bloomberg.

Moody’s Investors Service rated (TWX:US) the new bonds Baa2, two levels above speculative-grade debt, and Standard & Poor’s graded them an equivalent BBB. Bank of America Corp., Barclays Plc, BNP Paribas SA and Citigroup Inc. managed the sale, according to the filing.

To contact the reporter on this story: Charles Mead in New York at cmead11@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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