Blaze latest disaster to sear company
This article was updated at 5:50 p.m.
NEW YORK — Just hours after a fire at AOL Time Warner’s under-construction Gotham headquarters was brought under control Tuesday, the company announced that it plans to buy out Vivendi Universal’s stake in AOL Europe for $812 million in cash, instead of stock.
AOL TW was obligated to acquire the stake under a pre-existing agreement. Investors expected a cash deal, but many are concerned about the conglom’s mounting debt load.
After this transaction, AOL TW has approximately $8 billion of committed available funding, according to a statement.
“We believe that repurchasing this interest in AOL Europe with cash, rather than equity, is the right decision for our shareholders, given the current trading price of our stock. Although this transaction will increase our net debt, we remain fully committed to achieving our previously stated debt-reduction targets,” company chairman-CEO Richard Parsons said.
AOL TW shares will be under considerable pressure in coming weeks, as Comcast is expected to start unloading some $1.5 billion in shares it received last week as part of the unwinding of the Time Warner Entertainment partnership with the cabler.
Fire breaks out in new building
Early Tuesday morning, firefighters responded to a four-alarm fire at AOL TW’s new Gotham headquarters building on Columbus Circle. The blaze, which burned on the fourth through seventh floors of the 80-story building, took 170 firefighters and two hours to quell.
Arson is not suspected in the fire, which is believed to have started in an equipment shed. Two people suffered minor injuries.
Company sources said the opening of the 2.1 million-square-foot complex, expected in September, will not be delayed. The $1.7 billion complex also will house Jazz at Lincoln Center, a hotel, retail shops and a 190-unit residential section.
AOL Time Warner staff is skedded to move to Columbus Circle by spring 2004 and is expected to occupy 879,000 square feet of production studio and office space. The company carries $800 million in off-balance-sheet debt related to its Columbus Circle real estate project, occasionally referred to as its Taj Mahal and seen as a slightly embarrassing indulgence given the company’s financial plight.
A building spokesman said 90% of the complex’s seven floors of retail space is leased and the multimillion-dollar condos are selling well.
AOL TW shares closed up 2.38% at $12.45 on Tuesday.