8-KRegulation FDExhibits & Filings

Liberty Media Corp 8-K Report, Regulation FD Disclosure (Oct 27, 2016)

Filed October 27, 2016For Securities:FWONKFWONAFWONB

Summary

This Form 8-K filing by Liberty Media Corporation (the "Company") on October 27, 2016, primarily discloses the impact of the announced acquisition of Time Warner Inc. by AT&T Inc. on the Company's 2.25% Exchangeable Senior Debentures due 2046. The debentures were issued in August 2016 and are exchangeable into Time Warner common stock, cash, or a combination. The AT&T-Time Warner deal, announced on October 22, 2016, offers Time Warner shareholders a mix of cash and AT&T stock, subject to certain collars. This event triggers adjustments to the debentures as per their indenture. Investors should note that the structure of the debentures' payout will change significantly if the AT&T acquisition is consummated. Specifically, the debentures will be subject to an extraordinary cash distribution and will then be exchangeable for AT&T common stock instead of Time Warner stock. The number of AT&T shares received will depend on AT&T's stock price at the time of the acquisition's closing, within a specified range. The filing details the mechanics of these adjustments, including principal amount reduction and potential additional distributions related to AT&T's dividends. While these changes are outlined, they are contingent upon the successful closing of the AT&T-Time Warner transaction, expected by year-end 2017.

Key Highlights

  • 1Liberty Media's 2.25% Exchangeable Senior Debentures due 2046 are directly impacted by AT&T's announced acquisition of Time Warner.
  • 2The AT&T acquisition of Time Warner will result in adjustments to the debentures, including an extraordinary cash distribution and a change in the underlying exchangeable asset from Time Warner stock to AT&T stock.
  • 3The cash portion of the AT&T acquisition consideration will be paid as an extraordinary distribution to debenture holders, reducing the principal amount of the debentures.
  • 4Upon closing of the AT&T acquisition, debentures will become exchangeable for AT&T common stock, with the number of shares subject to a collar mechanism based on AT&T's stock price.
  • 5The number of AT&T shares per debenture will range approximately from 12.4348 to 13.7452 shares, depending on AT&T's average stock price at closing.
  • 6The indenture also provides for potential additional distributions to debenture holders if regular quarterly cash dividends on the AT&T reference shares exceed a certain threshold.
  • 7These debenture adjustments are contingent upon the consummation of the AT&T-Time Warner acquisition, which is subject to shareholder and regulatory approvals and expected to close before year-end 2017.

Frequently Asked Questions

The main event is the announcement on October 22, 2016, that AT&T Inc. has entered into a definitive agreement to acquire Time Warner Inc. This acquisition is expected to trigger specific adjustments to Liberty Media's 2.25% Exchangeable Senior Debentures due 2046 as outlined in the debenture's indenture.

The acquisition will lead to two primary adjustments: 1) an extraordinary cash distribution to debenture holders (reducing the principal amount of the debentures) from the cash portion of the acquisition consideration, and 2) the debentures becoming exchangeable for AT&T common stock instead of Time Warner common stock, with the number of AT&T shares determined by the acquisition's exchange ratio and subject to a collar.

The cash portion of the AT&T acquisition consideration will be paid as an extraordinary distribution of $514.1295 per $1,000 original principal amount of debentures. This distribution will reduce the outstanding principal amount of each debenture to approximately $485.8705.

After the acquisition closes, the debentures will no longer be exchangeable into Time Warner stock. Instead, they will be exchangeable into AT&T common stock. The number of AT&T shares will be determined by the acquisition's stock exchange ratio, with specific provisions (a collar) dictating the exact number of shares based on AT&T's average stock price leading up to the closing, ranging from approximately 12.4348 to 13.7452 AT&T shares per $1,000 original principal amount of debentures.

No, the adjustments to the debentures are contingent upon the successful consummation of the AT&T acquisition of Time Warner. The acquisition is subject to Time Warner shareholder approval, regulatory reviews (including by the DOJ and potentially the FCC), and is expected to close before the end of 2017. If the acquisition does not close, the debentures will not undergo these specific adjustments.