As expected, RCN Corp. filed for voluntary Chapter 11 bankruptcy protection Thursday -- a prepackaged deal that will allow the Princeton, N.J.-based overbuilder to reduce its debt from $1.7 billion to about $480 million.
RCN filed its bankruptcy petition in U.S. Bankruptcy Court for the Southern District of New York in Manhattan. According to the filing, the company had assets of $1.5 billion and liabilities of $1.8 billion.
The bankruptcy filing has been expected for months. Back in February, RCN said it was in negotiations with its bondholders to restructure its debt -- a move that would require a Chapter 11 filing. And last week, chairman David McCourt wrote an op-ed piece in The Wall Street Journal stating that RCN would file for bankruptcy in “a week or so.”
As part of the Chapter 11 filing, RCN said it has reached an agreement with Deutsche Bank to provide about $460 million in financing after its plan of reorganization is approved. The Deutsche Bank loans include a $310 million first-lien facility and a $150 million second-lien facility.
“We continue to believe that our strategy of selling bundled services over a broadband network will define the future of the industry,” McCourt said in a prepared statement.
“This has been proven true over the past several months as competitors continue to emulate our strategy,” he added. “Today’s filing is very positive news for RCN employees and customers. RCN can reduce its debt and emerge as a stronger, more efficient company, giving us a competitive advantage in the long run.”
According to RCN, it has created a reorganization plan that would pay its secured creditors in full in cash and offer stock in the newly reorganized company to unsecured creditors. Existing RCN shareholders would receive warrants that are exercisable into 2% of the new company’s shares.
RCN said in a prepared statement that the bankruptcy would not disrupt service.