Keith J. Kelly

Keith J. Kelly

Media

Sign of the Time is written in red ink: $1.5B

Since Time Warner announced its spinoff plan for Time Inc. in mid-March, the biggest guessing game in town has been how much debt will be loaded onto the publishing enterprise.

They were still guessing after the preliminary documents were filed with the Securities and Exchange Commission Nov. 22. And while the question came up at Monday’s meeting with about 300 senior managers of the publishing empire, no clear figure was revealed there, either.

But one trusted source said that the number Time Warner CEO Jeff Bewkes has been kicking around since the summer is around $1.5 billion, with banks expected to give it a 6 percent interest rate.

That would mean a debt payment of around $90 million a year.

Last year, Time Inc. had operating income of $420 million, down 25 percent from a year ago, and net income of $263 million, down 29 percent, and revenue of $3.4 billion, down 7 percent.

All Time Warner shareholders will automatically have shares of the proposed Time Inc., although Time Warner itself will not be a shareholder in the new Time Inc.

Back in late March, when Carol Loomis, the Hall of Fame financial editor at Fortune, was a keynote speaker at a Time Inc. alumni club gathering, she said that she felt “a debt level of $500 million to $1 billion was manageable.”

She said a debt level of $2 billion would be “ problematic.”

A $1.5 billion level seems to fall somewhere between “manageable” and “problematic.”

A spokesman for Time Warner on Tuesday said, “Nothing has been decided on debt.”

At the Monday management meeting, Time Inc. CEO Joe Ripp surprised some in attendance by insisting “debt is good,” according to insiders.

Chief Financial Officer Jeff Bairstow elaborated at the meeting that the company was “trying to find the right balance between long-term and short-term debt.”

Ripp also said the company was looking for investments, either in technology or acquisitions. Early in his run that began officially in September, Ripp had asked managers to come up with ideas for the company to consider as investments.

At this week’s meeting, he said that while some of the ideas were good, they “were not big enough.”

Of course, the biggest take-away came from the lips of Norm Pearlstine, chief content officer, who acknowledged in a Q&A session that more layoffs will be a “painful but necessary” step in the spinoff.

On the other hand, Ripp assuaged some when he told them that there would be “merit increases” for employees next year.

In the past year, after firing about 500 people, the survivors had to endure pay freezes and the elimination of Time Warner stock options. It seems the corporation initially did not expect Time Inc. to still be hanging around in the first quarter.