News

AOL Secures $10B Credit Lines

7/14/2002 8:00 PM Eastern

AOL Time Warner Inc. gave some hope to investors skittish over the media company's ability to raise cash last week when it secured two bank facilities worth $10 billion.

The credit lines will replace two earlier bank facilities that are set to mature this year, and will help AOL Time Warner maintain its strong liquidity position, the company said in a press release.

"These new bank credit facilities provide us with sufficient resources and flexibility to both operate our businesses and take advantage of strategic opportunities over the next few years," AOL Time Warner Inc. chief financial officer Wayne Pace said in a statement.

The loans come in two tranches — a $6 billion, five-year revolving credit facility and a $4 billion, 364-day revolving credit facility (with a two-year term-out option). The facilities were arranged through a syndicate of 27 financial institutions.

Agents for the credit lines are ABN AMRO Bank, Bank of America, BNP Paribas, Citibank and J.P. Morgan Chase Bank.

Securing the credit lines at reasonably favorable terms was viewed as good news for AOL Time Warner investors, who have watched their holdings dwindle in value amidst a flurry of corporate accounting scandals from the likes of WorldCom Inc. and Adelphia Communications Corp., as well as overall skittishness in the media sector.

The company announced the loans on July 8, after the stock market closed. The deal had little effect on AOL Time Warner's stock, which closed at $13.11 per share (down 88 cents) on July 10.

But analysts saw the move as an indication of further support from the banking community.

AOL has been under intense pressure as investors grew increasingly concerned about its heavy debt load — $28 billion — a burden exacerbated by its $7 billion purchase of the 49 percent of AOL Europe it didn't already own from Bertlesmann Group earlier this year.

Investors also are increasingly wary that AOL could be forced to pay as much as $10 billion for AT&T Corp.'s 25 percent interest in the Time Warner Entertainment partnership. AOL CEO Richard Parsons has insisted in the past that the company would not buy out AT&T's stake with stock or cash. The two parties continue to negotiate.

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