Turner to Keep Control of Firm With $550-Million Bailout Deal

Debt-laden Turner Broadcasting is dealing 35% of its common stock to cable system operators and financier Kirk Kerkorian in a $550-million bailout that will enable Ted Turner to keep majority control, the firm disclosed Thursday.

Fourteen of the nation’s largest television cable system operators, along with MGM/UA majority stockholder Kerkorian, agreed in principle to buy a combination of common and non-convertible preferred stock. Turner Broadcasting said other operators are expected to join the deal shortly.

The new investors are to have the right jointly to name five members of a reconstituted Turner Broadcasting board of 11 members. Current management is to retain complete editorial and operating control, the announcement said.

Ted Turner, who at present owns 81% of the publicly traded firm he founded, will end up with “slightly over 50%,” a company spokesman said.

Turner Broadcasting holdings include Cable News Network and SuperStation WTBS.

Coming nearly two weeks after negotiations were disclosed, the deal is seen by the industry as largely a self-protective move to keep the Turner empire in friendly hands and competitive with other major television program delivery systems. These include new satellite home dish service by Time Inc.’s Home Box Office and ESPN, jointly controlled by Time and Capital Cities/ABC.

The capital infusion is aimed at getting rid of an expensive load of special preferred Turner Broadcasting stock that could have eventually resulted in the maverick broadcaster’s losing control of his firm.

Turner Broadcasting took on the debt in acquiring its founder’s heart’s desire, the 3,650 films from MGM’s library, last summer from Kerkorian-controlled MGM/UA for about $1.2 billion. Its debt load is reported to exceed $1.3 billion, and interest costs were paramount in its $121.4-million loss for the first nine months of 1986.

Kerkorian ended up owning half the special Turner Broadcasting preferred stock, on which the firm might have had to start paying common stock dividends to him and other holders next June. However, proceeds of the newly announced deal will be used to redeem that preferred stock, the company said.

Turner Broadcasting declined to break down the participation interests of the buying parties.

However, Kerkorian’s role is seen in some quarters as basically that of a backstop to facilitate the cable system operators’ move.

By the time Kerkorian swaps his old Turner preferred, he conceivably will make no net cash payout for acquiring his Turner common and new preferred stock.

A Turner spokesman said new investors will get a total of 12 million shares of common and preferred stock, but did not specify how many shares of each.

Cable operators participating in the deal were named as:

Cablevision Systems, Continental Cablevision, Heritage Communications, Jones Intercable, Lenfest Group, Sammons Communications, Storer Cable Communications, TCI-Taft Cablevision, Tele-Communications, Times Mirror Cable Television, TKR Cable, United Artists Communications, United Cable Television and Viacom Cablevision.

Stewart Blair, UA’s chief executive, was quoted in the announcement as saying on behalf of the cable operators: “This proposed transaction and the broad base of cable participation signals significant support for what Ted and TBS have accomplished.”