AOL: Change of Leadership, Change of Debt Structure

Is Time Warner finally gearing up to spin off AOL? As a new chief executive takes the reins at AOL today, the Dulles-based company has turned to debtholders with a request to change the terms of more than $12 billion in loans. The proposed revisions suggest a separation of AOL from Time Warner could be in the works.

Under the previous terms of its debt, AOL was not allowed to sell off its assets, such as the popular celebrity gossip site TMZ and the online map service Mapquest. But under a proposed revision to those terms filed with the SEC, parent company Time Warner would guarantee AOL's debt with assets from its HBO division instead of AOL. Bondholders who agree to the amended terms would get a $5 payment for each $1,000 of debt tendered.

"The reason for the Proposed Amendments is to provide Time Warner with greater flexibility in considering strategic alternatives with respect to AOL LLC," the filing with the SEC reads.

In an all hands meeting last month, incoming CEO Tim Armstrong, formerly an executive with Google, promised that he would be spending a lot of time at the company's Dulles headquarters after he takes the job this month. Armstrong did not speak, at the time, about spinning the company off from Time Warner, a move that analysts and tech pundits -- and even AOL co-founder Steve Case -- have been suggesting for years.

By Mike Musgrove  |  April 7, 2009; 11:44 AM ET  | Category:  Mike Musgrove
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