Time Warner Weighs Change in Rights Offer

Time Warner Inc., responding to objections from shareholders and the Securities and Exchange Commission staff, announced Wednesday night that it is “considering alternative structures” for its controversial plan to raise up to $3.5 billion in new capital.

Under the plan announced last month, shareholders would be given rights to purchase new shares for $63 to $105 each, with the price to be determined by the number of rights exercised. The company has said the new capital would be used to reduce its heavy debt load.

The offering has generated widespread criticism from shareholders and some securities analysts for its variable-price structure, because stockholders might end up paying more than the current market price for their new shares.

The deal was also criticized for what some called its coercive nature and for the hefty fees, totaling as much as $179 million, promised to investment banking firms that agreed to underwrite the deal.

Still, the consensus on Wall Street has been that more than the minimum 60% of the rights--and perhaps 80% to 90%--would be exercised and that the deal would go through. So Wednesday’s announcement suggested to some that the important objections lay with the SEC staff.

“The only thing the SEC could be concerned about is the uncertain price,” said Lisbeth R. Barron of S. G. Warburg & Co., who speculated that the agency may be telling the company to set a fixed price.

Others speculated that the company might be considering a narrower price range.

By choosing a more conventional fixed-price structure, however, the underwriters must guarantee to buy shares not taken by stockholders, which exposes the underwriters to a substantial risk, Barron noted. That risk is perceived by bankers to be as much as $20 to $30 a share, she said. That would require Time Warner to raise fees even further to induce the investment bankers to underwrite the deal.

Still, the company attempted to put the best face on the latest hitch. “We expect to be able to satisfy the concerns” raised by shareholders and the SEC, a spokesman said.