Time Warner Inc. has taken a novel approach to selling off its stake in games maker Hasbro Inc.: It is taking its 14% stake in the game company and effectively turning it into notes for new investors. Those notes can then be exchanged for the actual Hasbro shares.

Analysts applauded the move, noting that TWI won’t be taxed on the sale of the stock until investors in the notes actually swap them for the Hasbro stock. The notes, called Liquid Yield Option Notes, or LYONs, are being offered by Merrill Lynch & Co. at a face value of $ 1.55 billion and mature in 2012.

The sale of the notes should bring $ 500 million to Time Warner, according to the company, which will be used to pay down some high-priced debt.

“Hasbro has been a magnificent investment for Time Warner,” said Mark Manson, an analyst with Donaldson, Lufkin & Jenrette. “The LYON issue appears to offer both the opportunity for further appreciation for the buyers and solve some tax issues for Time Warner.”

Time Warner acquired its stake in the Pawtucket, R.I., toy company in the early 1980s.

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