Time Warner's credit protection costs rise: Markit

NEW YORK (Reuters) - The cost of protecting Time Warner's debt with credit default swaps rose nearly 15 percent on Thursday after a report that it is closing in on a deal to combine Internet operations with Yahoo Inc.

Five-year credit default swaps on Time Warner rose by about 20 basis points to about 156 basis points, or $156,000 a year for five years to protect $10 million of debt, according to data from Markit Intraday.

The deal would fold Time Warner's AOL business, excluding its legacy dial-up Internet access operations, into a combined Yahoo company and would value AOL at $10 billion, a person familiar with the talks said. Yahoo would receive cash from Time Warner in exchange for 20 percent of a combined Yahoo-AOL, the source said.

News Corp is also considering joining Microsoft Corp in a bid for Yahoo, newspaper reports said.

(Reporting by Dena Aubin; Additional reporting by Eric Auchard and Anupreeta Das; Editing by James Dalgleish)