McCourt: RCN Filing Chapter 11 Soon5/21/2004 6:23 AM Eastern
RCN Corp. chairman David McCourt said in an op-ed piece in TheWall Street Journal Friday that the Princeton, N.J.-based overbuilder would likely file for Chapter 11 bankruptcy protection in “the next week or so.”
In his 1,000-word piece, McCourt blamed the cable “monopoly” for RCN’s predicament, adding that cable operators have raised rates by 40% over the past few years, while competition in the telephone market has kept phone rates low.
McCourt later admitted that RCN’s troubles were exacerbated by its inability to finance its aggressive network build-out.
“RCN's strategy depended on vast amounts of capital and a calculated bet that we could manage the balance sheet and replace debt with equity,” McCourt wrote. “When the capital markets suddenly shut down in the face of a stock-market collapse, that financial strategy was no longer viable.”
However, he added that RCN’s bankruptcy and those of other similar companies would create a new era in the industry as many of them emerge better positioned to compete without heavy debt burdens.
“That possibility should worry today’s cable giants who have been ignoring the logic of economics, the possibilities of technology and the interests of consumers for far too long,” McCourt wrote.
RCN had said as far back as February that it would file a prepackaged Chapter 11 bankruptcy to restructure its debt. On May 17, the company said it was continuing to negotiate with its bondholders and had extended its forbearance agreements with its lenders until June 1.
RCN stock fell 4 cents per share (24%) to 14 cents each in afternoon trading Friday.