RCN plans $250 million of term loan, unsecured debt for NEON purchase

By Sara Rosenberg

New York, June 25 - RCN Corp. is planning on getting $250 million in new debt, consisting of senior secured term loans and unsecured borrowings, to help fund its acquisition of NEON Communications Group, Inc., according to a company news release.

Deutsche Bank is the lead bank on the debt financing.

Under the agreement, RCN is buying NEON for up to $5.25 per share in cash, for an expected total consideration of up to about $260 million.

The transaction is expected to close during the fourth quarter, subject to FCC and state regulatory approvals, NEON's stockholder approval, and NEON achieving minimum agreed-upon revenue and EBITDA milestones during the second half of 2007.

In addition, assuming the required approvals are received and minimum financial milestones are met, the purchase price could be reduced by up to $0.10 per share if NEON does not meet certain supplementary revenue targets during the second half of the year.

Neither the acquisition nor the additional debt financing requires the consent of RCN's existing lenders.

RCN is a Herndon, Va.-based provider of video, data and voice services. NEON is a Westborough, Mass.-based facilities-based wholesale communications provider.

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