Turner Holding Discussions on Sale of Stock : Talks With Cable-TV Operators Are Aimed at Reduction of Huge Debt

Troubled Turner Broadcasting System disclosed Friday that it is talking with cable television operators about selling them some of its common stock in order to raise money.

Such a sale would dilute the 81% interest in the company now held by sportsman-broadcaster Ted Turner.

Analysts said Turner Broadcasting may need to sell stock to get out from under the enormous debt it has accumulated in recent years from its various adventures, such as the purchase of MGM/UA Entertainment last year and its vain attempt before that to buy CBS. Its losses for the first nine months of 1986 amounted to $121.4 million.

Fringe Benefit in Sales

Selling stock to cable operators also would help Turner Broadcasting by giving the operators an incentive to buy Turner programing, such as the newly acquired films from the MGM library, analysts said.

More importantly, they added, selling stock could help Turner escape the Catch-22 financing arrangement associated with its MGM purchase under which financier Kirk Kerkorian, the former majority owner of MGM, could end up owning Turner.

To buy MGM for $1.25 billion, Turner issued 53.3 million shares of his preferred stock to MGM shareholders. As part of the deal, Turner also agreed to pay handsome dividends on those shares--14% the first year alone. The first dividend payment is due this spring.

Fluke Takeover Possible

What’s more, whatever amount of that dividend Turner could not pay in cash he would have to make up in the form of Turner Broadcasting common stock. Over time, as MGM’s largest shareholder, Kerkorian could theoretically end up owning Turner.

“There is no question that this is the key,” said Ken Berentz, a securities analyst with the brokerage firm of Legg Mason Wood Walker Inc. “But the fact of the matter is, even beyond that, he is running into money problems, and I am sure he is going to all the top cable companies looking for help.”

Sharon Armbrust, a securities analyst with Paul Kagan & Associates in Carmel, Calif., said: “He needs to restructure, and there is no other way than to give up equity. He has such heavy debt that it is drowning the equity value of his company.”

Turner spokesman Arthur Sando did not disagree with that analysis. “Certainly the financial condition of the company is the reason that we are looking to strengthen ourselves for the future.”

In its announcement, Turner said that “while these discussions are continuing, there is no assurance that they will culminate in any firm agreement.”

Analysts, however, noted that, before acquiring MGM, Turner Broadcasting had held talks with one cable company, Tele-Communications Inc. of Denver, about selling stock--in part because of the incentive that would create for Tele-Communications to use Turner programming.

Those talks broke down in part because Ted Turner resisted giving up majority control of his company. Berentz, of Legg Mason, speculated that Turner this time might be seeking to sell to a variety of operators to assure his continued control.