Time Warner, Comcast Restructure Partnerships

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Time Warner Inc. and Comcast Corp. have agreed to restructure two cable-system partnerships in Kansas City and Texas, combining both properties and allowing one party to dissolve the partnership in two years.

According to a joint statement, Time Warner and Comcast will combine their Kansas City Cable Partners, with about 300,000 subscribers in Missouri, and their Texas Cable Partners joint venture, with about 1.2 million customers in Houston and southern Texas, into one entity that both companies will own equally.

Time Warner will continue to manage the joint venture for at least two years. The two companies currently own 50% each of both partnerships.

After June 1, 2006, or the second anniversary of the merger -- whichever comes later -- one of the two partners will have the option of triggering a dissolution of the joint venture.

At that point, the partnership would be split into two pools -- one consisting of the Houston systems and one consisting of the Kansas City and south Texas properties -- with the nontriggering party receiving the right to take full control of the one the triggering party did not select. The debt of both partnerships would be distributed equally.

That mechanism replaces an earlier buy-sell provision in the existing partnership agreement.

No cash or other remuneration would be involved in that trigger, according to one source familiar with both companies. The idea is that the two pools would be of equal value, allowing the triggering party to swap its 50% interest in one partnership for full control of the other.

The deal essentially allows both parties to maintain a holding pattern on the deal. Earlier this year, Time Warner had said that it would prefer to unwind the cable partnerships either as a way to raise additional money to pay down debt or to just simplify its balance sheet.

But after several asset sales -- the most recent its agreement to sell Warner Music Group to a group of investors led by Edgar Bronfman Jr. for $2.6 billion -- Time Warner is not under as much pressure to pare down its debt.

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