-By Anthony Crupi

Time Warner on May 21 spelled out the terms of the spinoff of its cable unit, announcing that it will receive a $9.25 billion one-time cash dividend, a measure that was approved by both boards.

Under terms of the deal, Time Warner will exchange its 12.4 percent stake in TW NY Cable Holding for 80 million shares of Time Warner Cable’s Class A common stock, upon which the cable company will pay out a $10.9 billion dividend to shareholders. With its 85.2 percent ownership stake, Time Warner will receive $9.25 billion of that cash payout.

The deal is expected to close in the fourth quarter.

“This is the right step for Time Warner and Time Warner Cable stockholders,” said Time Warner president and CEO Jeff Bewkes, by way of announcing the split. “After the transaction, each company will have greater strategic, financial and operational flexibility and will be better positioned to compete. Separating the two companies also will help their management teams focus on realizing the full potential of the respective businesses and will provide investors with greater choice in how they own this portfolio of assets.”

Bewkes first announced his decision to jettison Time Warner Cable from the corporate mother ship on April 30, during the media conglomerate’s first-quarter earnings call.

For its part, Time Warner Cable noted that while sizable, the payout is a reflection of the company’s confidence in its growth prospects.

“In a single transaction, we increase our strategic and financial flexibility, simplify our capital structure, enhance the public float and liquidity of our stock and return substantial capital to our stockholders,” Time Warner Cable president and CEO Glenn Britt said. “Importantly, we expect to accomplish all of this while maintaining solid investment-grade credit ratings.”

Time Warner Cable said it would fund the payout with its current revolving-credit line, plus $9 billion of bridge financing from a syndicate of banks. Time Warner has agreed to provide a two-year term loan of up to $3.5 billion to enable the operator to repay the bridge loan at maturity.

Citigroup Global Markets and Goldman, Sachs are serving as Time Warner’s lead financial advisers, while Morgan Stanley is advising Time Warner Cable.

Shares of Time Warner were up .99 percent to $16.31 in early-afternoon trading, while the cable unit rose 2.8 percent to $31.07.