Troubled cable overbuilder RCN Corp. said late Saturday that it was in negotiations to restructure its debt, adding that any agreement would likely take place through a Chapter 11 bankruptcy reorganization.
RCN said it would not make interest payments on its 10.125% senior notes. That decision could trigger defaults on all of its debt -- about $1.1 billion in bond obligations and $520 million in bank facilities.
However, the Princeton, N.J.-based overbuilder said it has reached a forbearance agreement with its lenders and bondholders, which agreed not to declare an event of default until at least March 1.
The interest payment on the 10.125% notes was due Jan. 15 and, at that time, RCN said it was negotiating with bondholders concerning payment -- a move many observers saw as a tactic to get bondholders to accept a debt-for-equity swap. The 30-day grace period to make the $10.3 million interest payment expired Feb. 13.
To help move the restructuring process along, the MSO last week named John Dubel -- who led a restructuring at WorldCom Inc. -- president and chief operating officer.
In a prepared statement, RCN said it hoped the continuing negotiations would lead to "a successful consensual financial-restructuring plan in the near term." However, later in its statement, the company said it "expects any financial restructuring to be implemented through reorganization under Chapter 11."
That Chapter 11 filing would be at the holding-company level -- RCN’s market operating subsidiaries would not be part of the bankruptcy filing, according to the statement.
RCN has set up a Web site (rcntomorrow.com) to provide updates to the restructuring process.
"We expect to emerge from any consensual restructuring as a stronger, more viable and more competitive company, positioned for long-term success," RCN chairman and CEO David McCourt said in a prepared statement
RCN shares fell 39% (31 cents each) to 49 cents per share Tuesday.
