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RCN could tweak exit financing

Tue, 10/19/2004 - 8:00pm
Soma Biswas

Copyright 2004

Daily Deal/The Deal

October 20, 2004 Wednesday

RCN Corp. is considering a change in its $460 million exit loan from Deutsche Bank AG that could result in a second lender funding $150 million of the financing.

The Princeton, N.J.-based cable and broadband company's disclosure statement outlines alternatives to $150 million in second-lien notes that are part of the exit loan package.

Judge Robert Drain in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan approved RCN's disclosure statement Thursday, Oct. 14, and set a confirmation hearing for Dec. 8.

The exit financing consists of $150 million in notes, a $285 million term loan and $25 million in letters of credit.

But RCN said in its disclosure statement that it's considering swapping the $150 million in notes for convertible second-lien notes that its bondholders could buy.

Moreover, RCN said "a significant financial institution has expressed an interest" in buying $70 million to $100 million in the convertible issues.

The German bank or RCN's bondholders could pick up the rest of the securities, court documents said.

The convertible notes would convert to RCN common stock under certain conditions. Under current financing terms, the notes to be issued to Deutsche Bank consist of pure debt.

On Friday, Drain also signed an order extending RCN's exclusive right to file a reorganization plan to Nov. 3 at the company's request.

The so-called bridge order extending RCN's exclusivity is unusual because RCN has already filed a reorganization plan with the agreement of its unsecured creditors' committee.

RCN said it wanted the extension even after it won approval for its disclosure statement to protect its right to make changes to the plan.

RCN's reorganization plan requires holders of $1.2 billion in unsecured notes to receive most of its equity. Roughly 1 percent of shares will be set aside for RCN's management.

Under the plan, the exit financing will be used to pay off a loan from J.P. Morgan Chase & Co. and other creditors.

RCN filed for Chapter 11 on May 27 in the Manhattan court.

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