RCN: Bankruptcy Won't Affect Service

Chicago Sun-Times
Published May 28, 2004
By Tammy Chase, Business Reporter

RCN Corp., the city's second-largest cable franchise, has filed for bankruptcy reorganization, but says the filing won't affect service in Chicago.

After RCN missed a payment to investors in January, the money-losing cable, telephone and Internet company said it would file for reorganization once it came to a restructuring agreement with its lenders and investors.

Princeton, N.J.-based RCN owes "tens of millions of dollars" in fines and payments to the city of Chicago, according to city Consumer Services spokeswoman Connie Buscemi. RCN owes the money for defaulting on payments it legally owes to CAN-TV, the city's cable access operation, which owns five public access stations.

RCN said its Chapter 11 filing "is not expected to result in any disruption of service to RCN customers." It said it expects to emerge from reorganization during the final three months of this year.

RCN is one of three cable companies serving Chicago. It has 77,982 subscribers along the lakefront from Rogers Park on the north to just north of Hyde Park on the south. Comcast is the largest, and Colorado-based Wide Open West serves 20 South Side neighborhoods.

The city has been levying fines of $1 million a day against RCN since February for defaulting on payments to the public access station and for not fulfilling promises it made four years ago -- when it first came to town -- to expand its network in the city.

Whether the city will see any of the money it's owed is questionable. A spokeswoman for the city's Law Department could not be reached Thursday for comment.

RCN has said it can't afford to expand its services in Chicago as it previously promised because the financial decline in the telecommunications industry since 2000 has left it unable to raise new money for expansion.

The company listed $1.49 billion in assets and $1.82 billion in debts, according to an abbreviated filing in U.S. Bankruptcy Court in New York. It did not list the debt it owes the city of Chicago.

By filing for reorganization, the company will be able to shed $1.18 billion of debt, allowing it to get back onto its feet, RCN said.

RCN has never turned a profit since being spun off in 1997 from C-Tec Corp., which is part of what is now a Pennsylvania phone company.

Deutsche Bank Securities has agreed to finance the company with $460 million once it emerges from bankruptcy.

As for CAN TV, it now expects to receive only about 60 percent of the $2.6 million it needs this year to keep going, because of the RCN problems, said CAN TV Executive Director Barbara Popovic.

Ald. Bernard Stone (50th) proposed a rescue plan earlier this month. He suggested that instead of funding CAN TV with payments directly from cable companies like RCN and Comcast, CAN-TV be funded with money that the city collects from the cable companies in the form of cable franchise fees. Under city law, cable companies pay the city 5 percent of their gross revenues.

Stone has suggested that CAN TV could receive about one-fifth or so of the estimated $11 million to $12 million the city gets annually from these fees, money that now goes into the city's general fund.

Stone said Thursday that "a million to $2 million (for CAN TV) on a budget of $4.8 billion is chicken feed" and would not be a hit to the city, which has struggled to make its revenue match rising expenses. Stone said he expects his proposal to go before the council's next Finance Committee meeting in June.

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