Corporate Finance: A Novel -- and Complex -- Offer

Time Warner sparks a Wall Street furor with a debt-paring plan that asks stockholders to pitch in more cash

When Time Warner last week put forth a novel financing plan designed to reduce its debt load, Wall Street responded with boos. But an even more widespread reaction was a baffled "Huh?" In an arrangement called a rights offering, the entertainment and information firm, the parent company of TIME, said it hoped to raise as much as $3.5 billion by selling current stockholders the rights to buy 34.5 million new shares. The price will depend on how many accept the offer.

Time Warner's objective is to pare away some of the $11 billion in debt -- $3 billion of which must...

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