The AOL offices in Beverly Hills, California are pictured November 12, 2007. REUTERS/Fred Prouser

NEW YORK (Reuters) - Time Warner Inc said on Thursday its bondholders had agreed to change the terms of their debt contracts, removing restrictions on a sale or spin-off of its beleaguered Internet unit AOL.

The media giant asked bondholders earlier this month to change terms on around $12.3 billion in outstanding debt, paving the way for a potential separation of the Internet unit. In exchange for the new agreement Time Warner will pay the bondholders around a total of $61.5 million.

Time Warner Chief Executive Jeff Bewkes has said he is examining options for the future structure of AOL. Last month he lured former Google Inc executive Tim Armstrong to head AOL with the possibility of leading a spin-off.

AOL has long been one of the weakest units at Time Warner, taking a series of writedowns reflecting the declining value of the assets and a slowing online advertising market. Time Warner’s portfolio includes HBO, Warner Bros film studios and the Time publishing unit.