SEC Filings

WARNER MEDIA, LLC filed this Form 10-Q on 08/02/2017
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the guarantee fees payable by CME and CME BV to Time Warner for Time Warner’s guarantees of CME’s obligations under its €251 million senior unsecured term loan that matures on November 1, 2018 and its €235 million senior unsecured term loan that matures on November 1, 2019 as well as CME BV’s obligation under its €469 million senior unsecured term loan that matures on February 19, 2021. The reduced fee to be paid to Time Warner for each of these guarantees is equal to a rate (the “all-in” rate) ranging between 5% and 8.5%, measured quarterly based on CME’s consolidated net leverage ratio, less the interest rate on the term loans. A portion of the fee equal to 5.0% less the interest rate on the term loans is payable in cash by CME and CME BV and the remainder may be payable in cash or in kind, at CME’s option. The 2017 Amendment also provides that if CME’s consolidated debt level is less than €815 million by September 30, 2018, the all-in rate will be decreased further by 50 basis points. In addition, if there is a change in control of CME, the all-in rate will increase to the lower of (i) the then applicable guarantee fee payable to Time Warner plus 3.5% and (ii) 10.0% on the date that is 180 days following such change of control. The 2017 Amendment did not affect the terms of the guarantees the Company provided to CME’s and CME BV’s lenders under the term loans.




A fair value measurement is determined based on the assumptions that a market participant would use in pricing an asset or liability. A three-tiered hierarchy draws distinctions between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3). The following table presents information about assets and liabilities required to be carried at fair value on a recurring basis as of June 30, 2017 and December 31, 2016, respectively (millions):


    June 30, 2017   December 31, 2016
        Level 1           Level 2           Level 3           Total           Level 1           Level 2           Level 3           Total    



Trading securities:


Diversified equity securities (a)

  $ 158      $     $     $ 158     $ 163      $     $     $ 163  

Available-for-sale securities:


Equity securities

    16                    16       17                    17  

Debt securities

    —        36             36       —        37             37  



Foreign exchange contracts

    —        32             32       —        153             153  


    —              305       305       —              161       161  





Foreign exchange contracts

    —        (5           (5     —        (9           (9


    —              (1     (1     —                     

































  $ 174      $ 63     $ 304     $ 541     $ 180      $ 181     $ 161      $ 522  


































Consists of investments related to deferred compensation.

The Company primarily applies the market approach for valuing recurring fair value measurements. As of June 30, 2017 and December 31, 2016, assets valued using significant unobservable inputs (Level 3) primarily related to warrants to purchase shares of Class A common stock of CME valued at $304 million and $159 million, respectively. The Company estimates the fair value of these warrants using a Monte Carlo Simulation model. Significant unobservable inputs used in the fair value measurement at June 30, 2017 are an expected term of 0.58 years and an expected volatility of approximately 42%. As of June 30, 2017 and December 31, 2016, the other Level 3 assets consisted of equity instruments held by employees of a former subsidiary of the Company. As of June 30, 2017, Level 3 liabilities consisted of a liability related to contingent consideration.