Time Warner offering targets Preferred C

Having retired more than 65 million shares of its Series D 11% Preferred Stock in recent weeks, Time Warner is now turning its attention to its Series C 8.75% Convertible Exchange Preferred Stock.

Time Warner chairman/CEO Gerald Levin yesterday announced that the company has filed with the Securities & Exchange Commission a shelf registration for the sale of up to $ 1.5 billion of debt securities convertible into or exchangeable for TW common stock.

Levin said the net proceeds to Time Warner from the sale of these securities will be used to repurchase or redeem a portion of the $ 3 billion of Series C Preferred Stock that was issued in 1990 following the merger of Time Inc. and Warner Communications.

TW said it intends the proposed securities to be no more dilutive to holders of common stock than the convertible shares to be retired. Accordingly, TW expects that any debt securities issued will have an effective economic conversion price or exercise price of about $ 50 per share of common stock.

Analysts applaud Time Warner’s decision to replace its high-cost preferred stock with lower-cost debt. The Series D 11% preferred stock was replaced with 7 .45% five-year notes, 7.95% seven-year notes and 9.15% 20-year bonds.

They estimate the proposed transaction to retire a portion of the Series C 8. 75% Preferred stock will create at least another $ 50 million annually in pretax cash flow.

But some financial types are questioning just how much Time Warner paper the market can digest.

In the last seven weeks, the company has saturated the market with a series of bond and note offerings totaling a whopping $ 3.43 billion. Underwriters for the various issues are having trouble fully selling one offering before being swamped by another.

Yesterday’s filing comes just one week after TW’s most recent offering: $ 1 billion of 9.15%, 30-year bonds, which itself came just one week after a $ 1 billion offering of five-year and seven-year notes.

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