Overbuilder RCN Corp. is looking to renegotiate the terms of its bank loans
saying that the company could fall out of compliance with loan covenants.
In releasing its earnings for the fourth quarter, RCN Chairman David McCourt
said that the company is looking at a "focused" business plan that would
concentrate on building the company's business only in its existing
markets-including New York, Boston and Washington, D.C.-with no new markets and
"limited expansion" even in the existing markets.
"In the event that an amendment is not obtained, RCN may or may not remain in
compliance with certain of its existing bank covenants later in the year," RCN
said in its earnings release.
RCN's $4 billion in debt and preferred stock includes $750 million in bank
Such loans typically require companies to meet certain cash-flow targets, or
banks can exact penalties or demand repayment.
In a conference call with analysts to discuss earnings, McCourt declined to
say what covenants RCN might violate and what amendments he might seek.
He said, however, that he believes that if RCN scales back it can make its
existing markets profitable.
"We've seen that in Boston," he said.
He noted that RCN has about $850 million in cash on hand.