The Wall Street Journal recently interviewed Time Warner Cable CEO Glenn Britt about the long-awaited spinoff from Time Warner. Surprising to analysts and deal watchers was the proviso that TWC would assume $10 billion in debt to pay a one time dividend, mostly to its parent company. In the interview, Mr. Britt claims that TWC's debt load is lower than the industry average and levering up was part of the effort to bring its capital structure in line with competitors. Sure TWC generates a lot of cash, but developing and delivering the next-generation services that customers want is not cheap. Why take a company that is at a competitive advantage (more free cash flow) and constrain it by borrowing to feed not its own growth, but the needs of the parent company?
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