RCN Files Chapter 11

RCN filed for Chapter 11 protection from its creditors Thursday as the upstart cable operator pursues a long-awaited restructuring.

The Princeton, N.J., provider of cable and Internet service said the financial overhaul would seek to cut its senior debt to $480 million from the current $1.66 billion. The company said it plans to emerge from bankruptcy in the fourth quarter.

The company said holders of existing preferred and common stock will get equity warrants exercisable into 2% of reorganized RCN's common stock, before giving effect to any management incentive plan. The warrants carry a two-year term at a strike price equivalent to an enterprise valuation of $1.66 billion.

RCN shares, which once traded as high as $70 on Nasdaq before the company got bogged down in debt, changed hands at 15 cents apiece on the thinly regulated pink sheets.

"This was a careful, proactive and deliberate process that achieved a consensus among all these stakeholders," said President John Dubel, who led the restructuring process. "Having worked on many telecom restructurings, I am very optimistic about RCN emerging quickly from Chapter 11 because its underlying business strategy remains sound."

RCN said it got new financing from Deutsche Bank consisting of a $310 million first-lien facility, including a $285 million term loan facility and a $25 million letter of credit facility, and a $150 million second-lien facility.