RCN Corp. has obtained cheaper and more flexible financing 18 months after emerging from bankruptcy protection. The cable company approached Deutsche Bank to lead a new $130 million credit facility after it improved its ratings and lowered its leverage through the sale of Mexican assets.
The facility consists of a seven-year, $75 million term loan priced at LIBOR plus 1 3/4% and a five-year, $55 million revolver priced at LIBOR plus 2%. Proceeds from the first lien will be used to refinance a $34 million first lien priced at LIBOR plus 4 1/4% and a $41 million third-lien term loan with a fixed rate of 12 1/2%. The new facility also has relaxed covenants, including a new leverage ratio covenant of 3.5 to 1 compared to 4.5 to 1 under the old facility.
Edward O'Hara, treasurer, said the company was happy with the pricing and said it is in line with companies of its ratings and size. "It improves our operating flexibility," he said. RCN's previous facility was part of an exit financing package that it obtained when it emerged from bankruptcy. The company approached Deutsche Bank, which led its previous exit financing, to do the deal. O'Hara said the company sought to refinance its credit facility after it paid down most of its previous first lien, which was originally $330 million, from the sale of Megacable, a Mexican subsidiary. The debt repayment from the sale resulted in a reduction in its leverage to 2.2 times from 5.5 times and led to Moody's Investors Service upgrading its corporate family rating to B1 from B3.
Citigroup is syndication agent on the new credit facility, while Société Générale is the documentation agent. RCN has $125 million of second-lien convertible notes with a fixed-rate coupon of 7 3/8% that will remain in place. The notes convert at $25.16 a share. O'Hara said the company has no plans to refinance the second lien.