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RCN launches $200 million term loan B add-on
By Sara Rosenberg
New York, Nov. 8 - RCN Corp. held a conference call on Thursday to launch its proposed $200 million term loan B add-on, according to a market source.
Deutsche Bank is the lead bank on the deal.
The add-on is priced at Libor plus 225 basis points, in line with existing term loan B pricing, the source said.
The new debt will be sold to investors with an original issue discount; however, that discount level is still to be determined, the source added.
Proceeds will be used to help fund the acquisition of NEON Communications Group Inc. for $5.15 to $5.25 per share, or an aggregate purchase price of $255 million to $260 million.
Other financing will come from a draw of about $25 million under the company's existing revolver and $50 million in cash on hand.
In connection with this term loan B add-on, a secured leverage covenant will be added to RCN's credit facility, which will apply to both the new and existing loans.
Pro forma for the transaction, debt to EBITDA will be 4.5 times and net debt to EBITDA will be 4.2 times.
Federal Communications Commission and substantially all state public utility commission approvals have already been received for the transaction, and NEON stockholder approval was obtained on Nov. 6.
The deal remains subject to confirmation that NEON has achieved minimum agreed-upon revenue and profit milestones during the three months ended Sept. 30. If the milestones were met, the transaction is expected to close in mid-November.
RCN is a Herndon, Va.-based provider of video, data and voice services. NEON is a Westborough, Mass., facilities-based wholesale communications provider.
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