April 5 - Fitch Ratings has affirmed the 'BBB' Issuer Default Rating (IDR) and all outstanding ratings of Time Warner Inc. (Time Warner) and its subsidiaries. The Rating Outlook remains Positive. A full list of ratings appears at the end of this release. The Positive Outlook continues to reflect Fitch's belief that the overall risks inherent in Time Warner's businesses and financial policy place the company at the very high end of the 'BBB' rating category, and could potentially warrant 'BBB+' ratings over the next 12 months. The stability, recurring revenue, and strong free cash flow generation of the cable networks remain the anchor for Time Warner's ratings. The strong expansion in both top line and margins in recent years has enhanced the visibility of the company's total revenue base, as well as the overall portion of recurring, high-margin revenue. This business now comprises more than two-thirds of total EBITDA. Fitch expects mid-single digit top line growth and stable margins over the next several years, driven by domestic affiliate fee growth and international expansion. The strong position of the Warner Bros. TV studio, lower than peers exposure to cyclical advertising, and lack of exposure to the hyper-cyclical local advertising markets, provide incremental support. Finally, Time Warner's performance during the economic downturn, as well as the speed and magnitude of its recovery, outperformed Fitch's expectations. This highlighted the stability in the Cable Networks and Filmed Entertainment segments and has resulted in Fitch taking a more optimistic view on the overall business. Over time, Fitch has grown more comfortable with Time Warner's commitment to its stated financial policy and the 2.5 times (x) net leverage target. Fitch estimates gross and net leverage of 2.7 times (x) and 2.3x at Dec. 31, 2011. The ratings and positive Outlook incorporate Fitch's expectations that Time Warner will issue debt to keep leverage at or near its target as EBITDA grows. Fitch expects Time Warner to use these proceeds, along with its more than $1.5 billion of post dividend free cash flow, for share repurchases and potential moderate acquisitions. Fitch's target for current ratings is 0.25 - 0.5x wider than the company's target, providing material operating and financial flexibility at current ratings. Fitch believes these same metrics could warrant a 'BBB+' rating category. While these metrics would be high among 'BBB+' rated credits, Fitch believes the company's size, scale, geographic and product diversity, strength of cable networks, and synergies between its studio and networks business, particularly in a digital media world, could support it. Overall, Fitch's ratings on Time Warner continue to reflect strong and consistent free cash flow, solid credit protection measures, sound liquidity, leading market positions in core businesses, and strong content brands. Fitch continues to believe that over-the-top (OTT), or Internet-based, television content will not have a material negative impact on Time Warner's credit profile or free cash flow over the intermediate term. Fitch also believes consumer demand for high quality, expensively-produced content will continue unabated, and that large, well-capitalized content providers, such as Time Warner, will remain crucial to the industry. Fitch believes Time Warner will continue to distribute its owned content rationally and with the goal of maximizing its long-term profitability and franchise value. Further, in Fitch's opinion the proliferation of new OTT entrants (Amazon, Comcast, etc.) and methods of consumption (smartphones, tablets) will continue to drive more demand for Time Warner's content, providing upside. Lastly, the 'TV Everywhere' initiative being undertaken by Time Warner and many of its peers could potentially increase the stickiness of traditional pay TV packages. While premium cable networks are more at risk of customer cancellation due to proliferating alternatives, HBO's compelling original content lineup serves as a major mitigant. Fitch expects spending on production and programming costs, specifically for original programming and sports rights, to continue to increase. It is unknown whether or to what degree this will pressure margins, or if it will be offset by top-line growth. Nonetheless, Fitch believes such spending is necessary in order to maintain a strong competitive position among increasingly fragmented audiences and proliferating entertainment alternatives. More certainty on Fitch's part that this spending will result in top line growth that enables margin growth, or at least stability, would provide Fitch with incremental comfort for Time Warner and the media industry in general. Other rating concerns focus on secular challenges facing all media conglomerates. Specifically, concerns include secular pressures facing the company's publishing division and the weak state of the DVD market. Also, while the studio business has meaningful scale and diversity and has been a steady contributor (compared to several peers), Fitch is cognizant of the inherent volatility of hit-driven content in the movie and TV production business. The ratings could be upgraded if Fitch concludes that the company's cable networks medium-term growth and margin profile are likely to remain largely unchanged, and that the digital transition will offset physical declines in publishing and DVD sales over the next several years. Fitch does not expect a change in financial policy, but a stronger underlying business with a larger portion of stable cable networks revenue could result in Fitch viewing the current financial policy as warranting higher ratings. The rating Outlook could be stabilized should Fitch begin to believe that the cable networks will be materially more susceptible to OTT alternatives than currently expected. Further, should the digital initiatives being undertaken at the studio (in home entertainment - electronic rentals and sales; Ultraviolet) and the publishing business (tablets, which is in the earlier stage with a final business model not yet determined) fail to provide an offset to the declines in the traditional businesses, ratings could be stabilized. At Dec. 31, 2011, Time Warner had approximately $19.5 billion in outstanding debt, consisting primarily of the following: --$638 million senior unsecured notes due May 2012; --$432 million senior unsecured notes due January 2013; --$300 million senior unsecured notes due July 2013; --$1 billion senior unsecured notes due July 2015; --$17 billion senior unsecured notes with maturities from 2016-2041. Time Warner's liquidity is strong and at Dec. 31, 2011, consisted of approximately $3.5 billion in cash and equivalents and $5 billion in available credit facilities, with $2.5 billion maturing in September 2015 and $2.5 billion in September 2016. In addition, Fitch expects the company to generate annual free cash flow (after dividends) in excess of $1.5 billion. Fitch affirms the following: Time Warner Inc. --Long-term Issuer Default Rating (IDR) at 'BBB'; --Short-term IDR at 'F2'; --Senior unsecured revolving credit facility at 'BBB'; --Senior unsecured notes and debentures at 'BBB'; --Commercial paper at 'F2'. Time Warner International Finance Limited --Long-term IDR at 'BBB' --Short-term IDR at 'F2'; --Commercial paper at 'F2'.