Bankers Trust, Chemical Launch Time Warner's $6.2 Billion Credit

By Siegel, David | American Banker, April 27, 1992 | Go to article overview

Bankers Trust, Chemical Launch Time Warner's $6.2 Billion Credit


Siegel, David, American Banker


In the largest refinancing of a corporate loan this year, Chemical Bank and Bankers Trust Co. last week began marketing a $6.2 billion credit for Time Warner Inc.

The new loan is being arranged for Time Warner Entertainment, a subsidiary that Time Warner will form later this year with Japan's Toshiba Corp. and C.Itoh & Co., which are investing $1 billion in the unit.

Interest Rate Going Up

Time Warner is refinancing its bank loans, originally set in 1989, in tandem with that equity investment and a $1 billion private placement of debt.

Despite the equity injection and the company's reduction in debt levels since 1989, Time Warner will end up paying a higher interest rate than under the existing agreement. Bankers have characterized the current pricing as inadequate.

The interest rate will float at one percentage point over the London interbank offered rate, which is now about 4.3%. The new rate represents an increase of 50 basis points over the current terms.

Time Warner's current bank lines were put in place shortly before regulators began requiring banks to report holdings of highly leveraged transactions. The regulatory crackdown, which formally ends this summer, spurred banks to increase interest rates on HLTs.

Debt Ratings Under Review

The one-percentage-point spread over Libor that Time Warner will pay will stay in effect for one year. …

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