Time Magazine 2015 Annual Report Download - page 95

TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CME Public Offering of Class A Common Stock and Private Placement of Series B Convertible Redeemable Preferred Shares
During the second quarter of 2013, CME conducted a public offering of shares of its Class A common stock in which
the Company purchased approximately 28.5 million shares for approximately $78 million in cash. On June 25, 2013, the
Company purchased $200 million of CME’s newly-issued, non-voting Series B convertible redeemable preferred shares. The
Series B convertible redeemable preferred shares will accrete in value through the third anniversary of closing at an annual
rate of 7.5% compounded quarterly and from the third anniversary to the fifth anniversary of closing at an annual rate of
3.75% compounded quarterly. Thereafter, the Series B convertible redeemable preferred shares will no longer accrete in
value. CME has the right from the third anniversary to pay a cash dividend to the Company in lieu of further accretion. Each
Series B convertible redeemable preferred share may be converted into shares of Class A common stock at the Company’s
option at any time after the third anniversary of the closing. The number of shares of Class A common stock received upon
conversion would be determined by dividing the accreted value of the Series B convertible redeemable preferred shares
(including any accrued but unpaid dividends) by the conversion price. In connection with the May 2014 transactions
described below, the conversion price was adjusted from $3.1625 to $2.4167.
CME Rights Offering and Related Transactions
On May 2, 2014, pursuant to a rights offering by CME, Time Warner acquired approximately 2.8 million units, each
consisting of a Senior Secured Note and 21 unit warrants, with each unit warrant entitling the Company to purchase one
share of CME Class A common stock. In addition, Time Warner acquired 581,533 units in a private offering, and CME
issued warrants to Time Warner to purchase an additional 30 million shares of Class A common stock.
CME Revolving Credit Facility and Term Loan Provided by Time Warner
On May 2, 2014, Time Warner provided CME a $115 million revolving credit facility and a $30 million term loan that
mature on December 1, 2017. Following an amendment in connection with the November 2014 transactions described below,
amounts outstanding under the revolving credit facility bear interest at a rate per annum based on LIBOR (subject to a
minimum rate of 1.00%) plus 9%. CME can pay accrued interest for an applicable quarterly interest period either fully in
cash or by adding such amount to the outstanding principal amount of the revolving credit facility. The revolving credit
facility also contains a commitment fee on the average daily unused amount under the facility of 0.50% per annum. As of
December 31, 2015, there were no amounts outstanding under the revolving credit facility. The $30 million term loan bears
interest at a rate of 15.0% per annum, paid semi-annually either fully in cash or by adding such amount to the principal
amount of the loan. As of December 31, 2015, the carrying value of the amounts outstanding under the term loan was
$24 million and is classified as an other asset in the Consolidated Balance Sheet.
Time Warner Guarantees of CME Debt
On November 14, 2014, Time Warner and CME entered into an agreement pursuant to which Time Warner agreed to
assist CME in refinancing $261 million aggregate principal amount of its Senior Convertible Notes due 2015 (“2015 Notes”)
and €240 million aggregate principal amount of its Senior Notes due 2017 (“2017 Notes”). In connection with this
agreement, CME entered into a credit agreement (the “2014 Credit Agreement”) with third-party financial institutions the
same day for a €251 million senior unsecured term loan that was funded in December 2014 and matures on November 1,
2017. Time Warner has guaranteed CME’s obligations under the 2014 Credit Agreement for a fee equal to 8.5% less the
interest rate on the term loan. The fee is payable to Time Warner in cash or in kind at CME’s option. CME used the proceeds
of the term loan to redeem the 2017 Notes. CME also entered into unsecured interest rate hedge arrangements to protect
against changes in the interest rate on the term loan during its term. Time Warner has also guaranteed CME’s obligations
under the hedge arrangements.
On September 30, 2015, CME entered into a credit agreement (the “2015 Credit Agreement”) with third-party financial
institutions for a €235 million senior unsecured term loan that was funded in November 2015 and matures on November 1,
2019. Time Warner has guaranteed CME’s obligations under the 2015 Credit Agreement for an annual fee equal to 8.5% less
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