Amended: Fitch Comments On TWE Restructuring; Otlk Neg; Rtgs Afmd.

Business Editors

NEW YORK--(BUSINESS WIRE)

Aug. 21, 2002: (This is an amended version of an earlier press release which includes the list of affirmed ratings).

As anticipated, AOL Time Warner (AOLTW) announced it has reached an agreement with AT&T and Comcast Corporation to restructure Time Warner Entertainment (TWE) rather than pursue a dissolution as provided for in the original partnership agreement. The negotiated transaction will result in all content businesses (Warner Bros, HBO, and TWE's interest in The WB network, Comedy Central and Court TV) being distributed to AOLTW which will own 100% of these assets and all cable assets being distributed to a new subsidiary of AOLTW to be called Time Warner Cable Inc. The negotiated transaction will result in a cash outlay by AOLTW of $2.1 billion and issuance of $1.5 billion in AOLTW stock to AT&T/Comcast, which will also retain a 21% economic interest in Time Warner Cable, in exchange for their stake in TWE. Further, as part of the transaction, AT&T Comcast will make AOL High Speed Broadband available on AT&T Comcast systems to at least 10 million homes within the first two years with the potential for additional homes being added in the future.

While Fitch believes the partnership restructuring is in the best interests of all parties involved, AOLTW's Rating Outlook remains Negative based on the interim debt financing arrangement for the transaction, weaker credit protection measures and ongoing accounting/regulatory issues. The increased leverage from the $2.1 billion cash payment to AT&T Comcast adds additional strain to AOLTW's current ratings. Although the company intends to repay this debt with proceeds from a planned IPO of Time Warner Cable, (AOLTW has the right to receive the first $2.1 billion of proceeds), execution risk associated with the IPO is a concern. The rating outlook also reflects the overall weaker credit protection measures which have resulted from declines in EBITDA primarily at the AOL business unit along with increased debt from the acquisitions of the 49.5% interest in AOL Europe (AOLE) and IPC. In addition, the potential for a negative outcome from the SEC and DOJ investigations is also factored into the outlook. Pro Forma for the announced transactions debt/EBITDA for the consolidated entity is materially above the 3.0x target for this category, and potential for further credit erosion exists. AOLTW needs continued strong operating and financial performance from its traditional Time Warner businesses and needs to reduce its debt levels, through the IPO of Time Warner Cable and other deleveraging events, to offset its strained capital structure.

Despite the negative outlook, Fitch continues to recognize AOLTW's significant subscription based revenue, its leading market positions in its core businesses, unparalleled brands, content and distribution network, in addition to its strong liquidity position. In addition, with the AOL high speed carriage agreement with AT&T Comcast, AOL increases its access to nearly 30% of U.S. households passed providing the unit with an opportunity to market its products and services to a wider customer base. The ratings also continue to reflect the company's exposure to advertising, albeit less significant, relative to industry peers as advertising and commerce represents less than 25% of total revenue, although at high margins. While the slowdown in the advertising market has clearly impacted the company's Networks, AOL, Publishing and Cable operations, Fitch also recognizes the competitive advantage the company has with advertisers due to its many premier brands, large scale and cross-medium platform.

AOLTW's liquidity position continues to remain strong and it has recently renewed its credit facilities, which consists of a $6 billion 5 year facility and a $4 billion 364 day revolver with a two-year term out option. The facilities contain no MAC clause covering the company's financial position or results of operations and the financial covenants include a maximum leverage ratio of 4.5x for AOLTW and 5.0x for TWE as well as a $50 billion minimum GAAP net worth covenant. As of 6/30/02, AOLTW had $1.9 billion of borrowings under its revolving credit facility and $2.4 billion of commercial paper outstanding. In July 2002 the company obtained the above mentioned credit facilities and terminated three previous existing facilities totaling $12.6 billion and made a $1.45 billion cash payment to acquire the remaining Bertelsmann interest in AOL Europe. Taken these factors into account, AOL had approximately $6.7 billion of available committed funding excluding amounts available to back up outstanding commercial paper at AOLTW and TWE. The company's liquidity position is enhanced by free cash flow, (which totaled approximately $2.4 billion YTD 6/30/02) no significant debt maturities until 2004 and no anticipated share repurchase activity.

Ratings Affirmed:

Entity/Issue/Rating/Outlook

AOL Time Warner Inc.

--senior unsecured debt 'BBB+' Rating Outlook Negative.

Time Warner Entertainment Co.

--senior unsecured debt 'BBB+' Rating Outlook Negative.