RCN Corp., a co-owner of Starpower, one of the Washington area's largest providers of cable television, Internet and telephone service, filed for Chapter 11 bankruptcy protection yesterday after it could not keep up with interest payments on its $1.6 billion in debt.
RCN said its financial troubles should not affect Starpower, its joint venture with Pepco Holdings Inc. "It should have absolutely no impact on customers. There should be absolutely no disruptions of service whatsoever," said RCN spokesman Barak Bar-Cohen.
Separate from the Starpower partnership, RCN offers cable TV, Internet and telephone service in several other major markets around the country, including Chicago and Boston.
The Princeton, N.J.-based telecommunications service company has a total of 460,000 customers across the country, including its 40,000 cable television customers in the Washington area. Starpower also provides telephone and Internet service to more than 20,000 homes in the area. RCN owns and operates its own facilities unlike many other upstarts that lease parts of the networks owned by telephone giants such as Verizon Communications Inc. and BellSouth Corp.
RCN has already negotiated terms with its creditors that should speed its exit from bankruptcy, an arrangement often referred to as a prepackaged bankruptcy.
Under terms of the deal filed with the U.S. Bankruptcy Court for the Southern District of New York, RCN hopes to wipe about $1.2 billion in debt off its books. Creditors plan to swap the debts they have amassed from RCN for equity in a new firm that will emerge from bankruptcy. Existing shareholders would likely be wiped out by the Chapter 11 process.
If RCN successfully completes the bankruptcy process, Deutsche Bank Securities has said it will make $460 million in new financing available to the company. One source close to the company said that RCN is setting a goal of completing the bankruptcy process by the end of the year.
Pepco announced in late January that it plans to sell its stake in Starpower. However, the District-based electric utility holding company has yet to find a buyer for its 50 percent interest.