Lack of Cash Burns RCN

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Moody's Investors Service lowered the speculative-grade liquidity rating on RCN Corp. to SGL-4 last week, citing what it called the cable overbuilder's shrinking cash balances and its difficulty in maintaining consistent positive cash-flow growth.

RCN's cash balances have been the primary source of its liquidity, but they have been depleted given its large negative free cash flow, according to Moody's. The ratings agency said the cash generated from asset sales over the past year and three quarters of positive cash flow haven't been enough to offset RCN's considerable cash burn. RCN also could be in violation of some of the covenants in its credit agreements, potentially exposing it to acceleration of its bank debt.

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