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RCN takes flak over $460 million exit financing from preferred shareholders
By Jeff Pines
Washington, June 21 - Vulcan Ventures Inc. and Wells Fargo & Co., two "substantial holders" of RCN Corp. preferred stock, fired flak at the company's proposed $460 million exit facility.
They filed their opposition with the U.S. Bankruptcy Court for the Southern District of New York on Friday.
The case is just too new for the court to hold a hearing on exit financing, they said. Neither said it has had enough time to carefully examine the company's finances or determine how the exit facility will fit into a restructuring.
The fees of possibly more than $14 million are also unwarranted since the company might not need the exit facility, they said. If the company decides to sell its assets, it will not need an exit facility but it will be out the fees it paid to secure the commitments.
Vulcan and Wells Fargo also believe the fees are too high.
In addition, adverse market changes would enable the lenders to opt out of the financing, Vulcan and Wells Fargo said.
Before it filed for Chapter 11, RCN held extensive discussions with its noteholders and lenders but the equity holders are in the dark, they said.
A June 22 hearing is scheduled.
RCN, which filed a pre-packaged Chapter 11 on May 27, expects to emerge in the fourth quarter. Its Chapter 11 case number is 04-13638.
Correction: RCN still needs approval for exit facility
It was incorrectly reported on June 10 that the RCN had obtained a court order for its proposed $460 million exit facility. In fact, the court approved an order allowing the company to file the fee letter and commitment letter under seal relating to the company's motion for an order approving the exit facility.
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