RCN Corporation's bank debt in a $5 million trade last week dropped to the high 60s from an offer of the mid-70s. Dealers say competition from other providers may be straining the company's profits, despite offering services at prices cheaper than some competitors. "They launched their deal two years ago, and people were very optimistic about it," a trader said. "Now they're not meeting their projections, and they've built out. There's just a high level of competition." Still, dealers expect the cable industry will stay in focus. "Cable television is one of the utilities," said a market watcher. "It's up there with electricity and water. No one wants to lose their MTV."
Earlier this month RCN's debt was nudged up to the high 70s on news of a capital infusion from Red Basin Capital (LMW, 6/3). The company has a $3 billion deal that breaks down into three tranches and expires in 2006. J.P. Morgan Chase, Merrill Lynch, Morgan Stanley and Deutsche Banc Alex. Brown are the lead arrangers. Pricing ranges from LIBOR plus 21/ 2% to LIBOR plus 31/ 2%.