Banks Give $10 Billion Worth of Credit to AOL

At a time of growing concerns about its financing, AOL Time Warner Inc. received a vote of confidence from commercial banks Monday by obtaining new credit facilities totaling $10 billion.

The new facilities replace two maturing this year. They don’t automatically change AOL’s sizable long-term debt balance of about $28 billion or its cash balance of $857 million.

But Wall Street analysts suggested the move couldn’t hurt investor confidence in AOL, which has been shaky in recent weeks. Last week, AOL shares hit a 52-week low of $12.04. Shares fell 61 cents to $14 on Monday on the New York Stock Exchange.

“The positive thing about it is, it just continues to show the support the company is getting from the commercial banking community,” said Youssef Squali, analyst with First Albany.

AOL said late Monday that it had closed a $6-billion, five-year revolving credit facility and a $4-billion, 364-day revolving facility. They were arranged through a syndicate of 27 banks that provided for almost $12 billion of commitments, the company said. The agents were ABN Amro, Bank of America, BNP Paribas, Citibank and J.P. Morgan Chase.

AOL may dip into the credit facilities for same-day funding, multi-currency capability and letter-of-credit availability.

“We appreciate the continued support and confidence in our company’s financial stability and prospects that the banks and investment banks are showing by providing these credit commitments,” Wayne Pace, AOL Time Warner’s chief financial officer, said in a news release.

In recent months, investors have grown increasingly concerned about AOL’s balance sheet. Its long-term debt has risen, partly because of its agreement earlier this year to purchase the 49% stake in AOL Europe that it didn’t already own from Bertelsmann for $6.75 billion.

Also, some investors have worried that AOL could be on the hook to pay upward of $10 billion to purchase the 25% stake in its Time Warner Entertainment partnership that it doesn’t already own from AT&T; Corp. AOL and AT&T; are in discussions over the fate of AT&T;’s stake.

The general fear has been that AOL would take actions to hurt its credit rating and increase its borrowing costs. To counter these fears, AOL executives, led by Chief Executive Richard Parsons, have gone out of their way to assure investors that the company will work hard to maintain its investment-grade debt ratings.