================================================================= RCN CORP. BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2004 (ISSN XXXX-XXXX) May 27, 2004 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- RCN CORP. BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Julie Anne G. Lopez, Frauline S. Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any Re-mailing of RCN CORP. BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO RCN CORP. BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF RCN CORPORATION [00002] RCN'S CONSOLIDATED MARCH 31, 2004 BALANCE SHEET [00003] DEBTORS' PRESS RELEASE ANNOUNCING CHAPTER 11 FILINGS [00004] RCN DEBTORS' CHAPTER 11 DATABASE [00005] LIST OF THE DEBTORS' 17-LARGEST UNSECURED CREDITORS [00006] LIST OF THE DEBTORS' 5-LARGEST SECURED CREDITORS [00007] DEBTORS' MOTION FOR AUTHORITY TO USE CASH COLLATERAL [00008] ORGANIZATIONAL MEETING TO FORM OFFICIAL COMMITTEES KEY DATE CALENDAR ----------------- 05/26/04 Voluntary Petition Date __/__/04 Organizational Meeting with UST to form Committees 06/10/04 Deadline for filing Schedules of Assets and Liabilities 06/10/04 Deadline for filing Statement of Financial Affairs 06/10/04 Deadline for filing Lists of Leases and Contracts 06/15/04 Deadline to provide Utilities with adequate assurance 07/25/04 Deadline to make decisions about lease dispositions 08/24/04 Deadline to remove actions pursuant to F.R.B.P. 9027 09/23/04 Expiration of Debtors' Exclusive Plan Proposal Period 11/22/04 Expiration of Debtors' Exclusive Solicitation Period 05/26/06 Deadline for Debtors' Commencement of Avoidance Actions First Meeting of Creditors pursuant to 11 USC Sec. 341 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO RCN CORP. BANKRUPTCY NEWS ----------------------------------------------------------------- RCN CORP. BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of RCN CORP. BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving RCN CORP. 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Please enter my personal subscription to RCN CORP. BANKRUPTCY NEWS at US$45 per issue until I tell you to cancel my subscription. Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) RCN CORP. BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of RCN CORP. BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF RCN CORPORATION ----------------------------------------------------------------- RCN CORPORATION 105 Carnegie Center Princeton, New Jersey 08540-6215 Telephone (609) 734-3700 http://www.rcn.com/ With 436,000 customers and 1,084,885 customer connections as of September 30, 2003, RCN Corporation (OTC BBS: RCNC) is the nation's first and largest facilities-based competitive provider of bundled phone, cable and high speed internet services delivered over its own fiber-optic local network to consumers in the most densely populated markets in the United States. RCN provides service in the Boston, New York, Eastern Pennsylvania, Chicago, San Francisco and Los Angeles metropolitan markets. RCN also holds a 50% LLC membership interest in Starpower, which serves the Washington, D.C. metropolitan area. RCN Corporation is a holding company for certain direct and indirect subsidiaries: * TEC Air, Inc. * RCN Financial Management, Inc. * RCN Internet Services, Inc. * UNET Holdings, Inc. * RLH Property Corporation * RCN Entertainment, Inc. * ON TV, Inc. * Hot Spots Productions, Inc. * RCN Telecom Services of Illinois, LLC * 21st Century Telecom Services, Inc. * RCN Cable TV of Chicago, Inc. * RCN Finance, LLC * RFM 2, LLC * Brainstorm Networks, Inc. * RCN Telecom Services, Inc. * RCN International Holdings, Inc. * RCN Telecom Services of Massachusetts, Inc. * RCN Telecom Services of Philadelphia, Inc. * RCN Telecom Services of Virginia, Inc. * RCN Telecom Services of Washington, D.C., Inc. * RCN-BecoCom, LLC * Starpower Communications, LLC * RCN Charitable Foundation, Inc. Substantially all of RCN's operating subsidiaries have NOT filed for chapter 11 bankruptcy protection. The RCN Companies deliver bundled communications services, including local and long distance telephone, video programming (including digital cable television and high definition television) and data services (including cable modem, high speed Internet access and dial-up Internet) to customers over their predominantly owned network. The RCN Companies provide services in: * Boston and 18 surrounding communities, * New York City, * the suburbs of Philadelphia, * the Lehigh Valley in Pennsylvania, * Chicago, * San Francisco and several of its suburbs, and * two communities in the Los Angeles area. The RCN Companies also entered into strategic joint venture relationships to achieve early penetration of certain telecommunications services markets to reduce their cost of entry. In particular, the RCN Companies own: * a 50% equity interest in Starpower Communications, LLC, which provides telecommunications services in the Washington, D.C. metropolitan area, including parts of Virginia and Maryland, under the brand name "Starpower." * an approximate 49% equity interest in Megacable, S.A. de C.V., Megacable Telecommunicaciones, S.A. de C.V. and MCM Holdings, S.A. de C.V., collectively the largest cable television provider in Mexico and owner of 27 wireline cable systems. The RCN Companies are telecommunications providers, and for the most part, compete against incumbent service providers. The telecommunications business is highly competitive and requires large capital outlays for network and equipment. Returns on investment depend on the quality, innovation and pricing of the services. The RCN Companies offer cutting edge services at prices that take into consideration the number and types of services in the bundle a customer purchases. The RCN Companies currently employ approximately 2,600 workers and independent contractors. Capital Structure and History RCN was formed on September 30, 1997 when its predecessor company, C-TEC Corporation, spun-off RCN to C-TEC shareholders. Prior to the spin-off, C-TEC was an indirect, wholly owned subsidiary of Level 3 Delaware Holdings, Inc. Since its inception, the RCN Companies have relied extensively on access to the capital markets to finance the development of a high-speed, high-capacity, fiber-optic broadband network. In addition, the RCN Companies have accessed the capital markets to finance their strategy of expanding into new geographic areas by acquiring existing businesses. Thus, the RCN Companies have financed a significant portion of their growth, including corporate acquisitions and purchases of fixed assets, through access to secured credit facilities and the issuance of debt securities and preferred and common stock. Secured Credit Facilities In June 1999, RCN Corporation, Hot Spots Productions, Inc., TEC Air, Inc., and other Non-Debtor Affiliates, each either as a borrower or guarantor, entered into a $1 billion senior secured credit facility with J.P. Morgan Chase Bank as administrative agent and collateral agent and certain other lender parties. The Senior Credit Facility is comprised of a $250 million seven-year revolving credit facility, a $250 million seven-year multi-draw term loan facility and a $500 million eight-year term loan facility, each of which is secured by a senior lien on substantially all of the RCN Companies' assets. The Senior Credit Facility is governed by a single credit agreement dated as of June 3, 1999, as amended. As of April 30, 2004, approximately $432.5 million was outstanding under the Senior Credit Facility. In June 2003, RCN entered into a $41.5 million Commercial Term Loan and Credit Agreement with Evergreen Investment Management Company, LLC, and certain of its affiliates. As of April 30, 2004, approximately $27.5 million was outstanding under the Junior Credit Facility. The Junior Credit Facility is secured by a junior lien on substantially all of the assets of RCN (excluding cash), including the equity of its directly owned subsidiaries (except for RLH). Pursuant to an intercreditor agreement between the Senior Lenders and Evergreen, the liens securing the Junior Credit Facility are contractually subordinated to the liens securing the Senior Credit Facility. Senior Unsecured Notes Between 1997 and 2000, RCN issued five sets of senior notes: * the 10% Senior Notes due October 15, 2007, issued under the Indenture dated October 17, 1997, as amended, * the 11-1/8% Senior Discount Notes due October 15, 2007, issued under the Indenture dated October 17, 1997, as amended, * the 9.8% Senior Discount Notes due February 15, 2008 issued under the Indenture dated February 6, 1998, as amended, * the 11% Senior Notes due July 1, 2008, issued under the Indenture dated June 24, 1998, as amended, and * the 10-1/8% Senior Notes due January 15, 2010, issued under the Indenture dated December 22, 1999, as amended. The Senior Notes are unsecured obligations of RCN only, and none of the other Debtors or Non-Debtor Affiliates have any obligations thereunder. RCN's obligations under the Senior Notes were approximately $1.1 billion as of December 31, 2003. Preferred and Common Stock RCN issued two series of preferred stock. On April 7, 1999, Hicks, Muse, Tate & Furst purchased 250,000 shares of Series A Preferred Stock of RCN for gross proceeds of $250 million. As a result of the payment of dividends in kind, Hicks Muse holds 353,289 shares of Series A Preferred Stock as of March 31, 2004. On February 28, 2000, Vulcan Ventures Inc., an investment organization of Paul G. Allen, purchased 1.65 million shares of mandatorily convertible cumulative preferred stock of RCN for gross proceeds of $1.65 billion. As a result of dividends and subsequent transactions, Vulcan holds 1,222,250 shares of Series B Preferred Stock and Wells Fargo & Company, the only other holder of Series B Preferred Stock, holds 251,332 shares of Series B Preferred Stock as of March 31, 2004. Shares of RCN's Class A Common Stock were listed on the NASDAQ stock exchange under the symbol RCNC. On May 12, 2004, RCN's Common Stock was delisted from the NASDAQ stock exchange and is now quoted on the OTC Bulletin Board under its present RCNC symbol. As of December 31, 2003, there were approximately 101 million shares of Common Stock issued and outstanding and 11,424,810 shares of Class B Common Stock issued and outstanding. Events Leading to Chapter 11 Filings The confluence of a series of events, Chief Restructuring Officer Anthony M. Horvat explains, including the continued severe slowdown in the telecommunications industry and continued limited access to the capital markets, caused the RCN Companies to revise their growth plan during 2002. Under the revised growth plan, the RCN Companies decided to substantially curtail future capital spending and geographic expansion of their network in all existing markets to focus on customer growth in existing markets and to reduce operating expenses. Despite these and other cost-savings measures, the RCN Companies determined that their projected revenues and available cash-on- hand may be insufficient to meet their working capital, debt service, capital expenditure and other requirements (including interest payments on Senior Notes) in 2004 and beyond. Accordingly, the RCN Companies began exploring alternatives to refinance or restructure their indebtedness. In October 2003, the RCN Companies began preliminary discussions with an ad hoc committee of certain holders of Senior Notes and JPMorgan Chase as administrative agent for the Senior Lenders concerning a possible restructuring transaction. In connection with ongoing negotiations with the Noteholders' Committee and JPMorgan Chase, RCN chose not to make the interest payment scheduled for January 15, 2004 with respect to its 10-1/8% Senior Notes due 2010, and additionally chose not to make the interest payment scheduled for February 15, 2004 on the 9.8% Senior Discount Notes due 2008, the interest payment scheduled for April 15, 2004 on the 10% Senior Notes due 2007 and the interest payment scheduled for April 15, 2004 on the 11-1/8% Senior Discount Notes due 2007. The RCN Companies entered into forbearance agreements with the Senior Lenders, Evergreen and the Noteholders' Committee in which each agreed not to declare an event of default as a result of RCN's failure to make the interest payments. The parties to the forbearance agreements subsequently extended the forbearance period to facilitate additional negotiations. The forbearance agreements allowed the RCN Companies to continue negotiating a financial restructuring with the Noteholders' Committee and JPMorgan Chase, notwithstanding the expiration of the grace period associated with the missed interest payments in respect of the aforementioned Senior Notes. During the forbearance period, the RCN Companies sought to negotiate a comprehensive restructuring proposal in which the RCN Companies would undergo a financial restructuring through reorganization under chapter 11. Those negotiations included discussions with various entities on a possible new credit facility to replace the existing Senior Credit Facility. These talks, Mr. Horvat relates, were productive. Mr. Horvat cautions that the understanding reached between the Debtors and certain of its creditors covers the broad economic terms of the financial restructuring and not all material terms expected to be contained in a plan of reorganization. The understanding is not binding on RCN or the creditors with whom it was negotiated and not all stakeholders are party to this understanding or participated in its negotiations. The Road Out of Bankruptcy RCN has entered into a commitment letter with Deutsche Bank Securities, Inc., pursuant to which Deutsche Bank has committed to provide the Debtors with new financing upon the consummation of a plan of reorganization. The new financing will consist of * a $310 million first lien facility, including a $285 million term loan facility and a $25 million letter of credit facility, and * a $150 million second lien facility. Each of the facilities will be guaranteed by all of RCN's wholly owned domestic subsidiaries and secured by substantially all the assets of RCN and its wholly owned domestic subsidiaries. Each of the facilities will contain prepayment provisions, covenants (including financial covenants) and events of default customary for facilities of this nature. Closing and funding for each of the facilities is subject to satisfaction of customary conditions precedent for facilities of this nature. In addition, the Debtors, the Senior Lenders and the Noteholders' Committee have agreed to support a financial restructuring on these terms: (a) On the effective date of a plan of reorganization or sooner, the existing holders of claims under the Senior Credit Facility will have those claims repaid in full in cash, unless any existing Senior Lender elects to roll its outstanding claim into the new facility. All undrawn letters of credit will be either replaced on the effective date of a plan of reorganization or cash collateralized on terms agreed by the issuing bank. (b) On the effective date of a plan of reorganization, each holder of an allowed general unsecured claim will receive, in exchange for its total claim (including principal and interest in the case of a claim under the Senior Notes), its pro rata portion of 100% of the fully diluted new common stock of reorganized RCN, before giving effect to (i) any management incentive plan, and (ii) the exercise of any equity warrants. (c) On the effective date of a plan of reorganization, all obligations under the Junior Credit Facility will either (i) remain outstanding on terms agreed upon between the Debtors and Evergreen or as otherwise permitted by the Bankruptcy Code, or (ii) be refinanced in whole or in part. (d) Holders of RCN's existing Preferred Stock and Common Stock will receive, on a basis to be determined, equity warrants that are exercisable into two percent of reorganized RCN's common stock (before giving effect to any management incentive plan), with a two-year term beginning on the consummation of a plan of reorganization, and set at a strike price equivalent to an enterprise valuation of $1.66 billion. Holders of existing warrants and options will not be entitled to receive a distribution under the plan of reorganization on account of those interests. (e) On the effective date of a plan of reorganization, the sole equity interests in reorganized RCN will consist of new common stock, the equity warrants and equity interests to be issued in any management incentive plan. (f) On the effective date of a plan of reorganization, there will be no debt, security or other material obligation of reorganized RCN other than indebtedness or securities and obligations arising in the ordinary course of reorganized RCN's business. ----------------------------------------------------------------- [00002] RCN'S CONSOLIDATED MARCH 31, 2004 BALANCE SHEET ----------------------------------------------------------------- RCN Corporation and Subsidiaries (Including non-Debtors) Consolidated Summary of Assets and Liabilities As of March 31, 2004 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $19,559,000 Accounts receivable (net) 58,560,000 Restricted investments (short-term) 142,502,000 Prepaid expenses and other current assets 34,277,000 -------------- Total current assets 254,898,000 Property, plant & equipment (net) 885,154,000 Investments in joint ventures and equity securities 208,440,000 Long-term restricted investments 100,000,000 Intangibles and other assets 38,290,000 -------------- Total assets $1,486,782,000 ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses $208,134,000 Advance billings and customer deposits 26,522,000 Current maturities of long-term debt 1,579,981,000 -------------- Total Current Liabilities 1,814,637,000 Other deferred credits 5,686,000 -------------- Total liabilities 1,820,323,000 Preferred Stock 1,804,741,000 Shareholders' equity (2,138,282,000) -------------- Total liabilities and shareholders' equity $1,486,782,000 ============== ----------------------------------------------------------------- [00003] DEBTORS' PRESS RELEASE ANNOUNCING CHAPTER 11 FILINGS ----------------------------------------------------------------- RCN Forges Consensual Agreement With Creditors, Signs New Bank Deal With Deutsche Bank Company Uses Chapter 11 to Facilitate Restructuring; Plans to Emerge in Fourth Quarter of this Year PRINCETON, New Jersey -- May 27, 2004 -- RCN Corporation (OTC Bulletin Board: RCNC) ("RCN" or the "Company") announced today that its senior secured lenders (the "Lenders") and members of an ad hoc committee of holders of its Senior Notes (the "Noteholders' Committee") have agreed to support a financial restructuring []. In order to facilitate the restructuring, RCN Corporation, the parent holding company, and several non- operating subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of Title 11 of the United States Code in the U.S. Bankruptcy Court for the Southern District Court of New York. In connection with the proposed financial restructuring, RCN also announced today that it has entered into a commitment letter with Deutsche Bank Securities, Inc., pursuant to which Deutsche Bank has committed to provide the Company with new financing upon the consummation of the plan of reorganization. The new financing will consist of (i) a $310 million first lien facility, including a $285 million term loan facility and a $25 million letter of credit facility, and (ii) a $150 million second lien facility. Each of the facilities will be guaranteed by all of RCN's wholly owned domestic subsidiaries and secured by substantially all the assets of RCN and its wholly owned domestic subsidiaries. Each of the facilities will contain prepayment provisions, covenants and events of default customary for facilities of this nature. Closing and funding for each of the facilities is subject to satisfaction of customary conditions precedent for facilities of this nature. "We continue to believe that our strategy of selling bundled services over a broadband network will define the future of the industry," said Chairman and CEO David C. McCourt. "This has been proven true over the last several months as competitors continue to emulate our strategy. Today's filing is very positive news for RCN employees and customers. RCN can reduce its debt and emerge as a stronger, more efficient company, giving us a competitive advantage in the long run." In the event that the financial restructuring is completed [], RCN estimates that today's $1.66 billion of indebtedness to the senior secured lenders and noteholders could be reduced to approximately $480 million. "This was a careful, proactive and deliberate process that achieved a consensus among all these stakeholders," said John Dubel, President and Chief Operating Officer who led the restructuring process. "Having worked on many telecom restructurings, I am very optimistic about RCN emerging quickly from Chapter 11 because its underlying business strategy remains sound." The Company said it planned to emerge from Chapter 11 in the fourth quarter of 2004. In connection with the Chapter 11 filings, RCN has obtained waivers from its existing Lenders that waive any events of default caused by the Chapter 11 filings and amend the minimum cash requirements under its existing senior secured credit facility. RCN reiterated that today's Chapter 11 filing is not expected to result in any disruption of service to RCN's customers. Summary of the terms of the financial restructuring: * On the effective date of a plan of reorganization or sooner, the existing senior secured credit facility will be repaid in full in cash, unless any existing lender elects to roll its outstandings into the new facility. All undrawn letters of credit will be either replaced on the effective date of a plan of reorganization or cash collateralized on terms agreed by the issuing bank. * On the effective date of a plan of reorganization, each holder of an allowed general unsecured claim will receive, in exchange for its total claim (including principal and interest in the case of a bond claim), its pro rata portion of 100% of the fully diluted new common stock of reorganized RCN, before giving effect to (i) any management incentive plan and (ii) the exercise of the equity warrants described below, if any. * Holders of RCN's existing preferred stock and common stock will receive, on a basis to be determined, equity warrants that are exercisable into two percent of reorganized RCN's common stock (before giving effect to any management incentive plan), with a two-year term beginning on the consummation of a plan of reorganization, and set at a strike price equivalent to an enterprise valuation of $1.66 billion. Holders of existing warrants and options will not be entitled to receive a distribution under the plan of reorganization on account of those interests. * On the effective date of a plan of reorganization, all obligations under the Commercial Term Loan and Credit Agreement, dated as of June 6, 2003, among the Company, the lenders party thereto and HSBC Bank USA, as agent (the "Evergreen Facility"), will either (i) remain outstanding on terms agreed upon between the Company and the lenders under the Evergreen Facility or as otherwise permitted by the Bankruptcy Code, or (ii) be refinanced in whole or in part. * On the effective date of a plan of reorganization, the sole equity interests in reorganized RCN will consist of new common stock, the equity warrants [] and equity interests to be issued in any management incentive plan. * On the effective date of a plan of reorganization, there will be no debt, security or other material obligation of reorganized RCN other than indebtedness or securities [] and obligations arising in the ordinary course of reorganized RCN's business. "Ultimately this agreement was achieved since all of us believe that RCN has a solid long-term business plan," said Russ Belinsky, Senior Managing Director of Chanin Capital Partners, financial advisors to the Noteholders' Committee. "We are eager to see a stronger RCN emerge with the right capital structure." The agreement reached between RCN and its creditors covers the broad economic terms of the financial restructuring and not all material terms expected to be contained in a plan of reorganization. The agreement is not binding on RCN or the creditors with whom it was negotiated and not all RCN stakeholders are party to this agreement or participated in its negotiations. Therefore, there can be no assurance that the current agreement will result in a binding definitive agreement and fully consensual plan of reorganization, or if [a] plan of reorganization is reached, when or if [a] plan will be approved by all RCN stakeholders entitled to vote thereon. In addition, the implementation of a plan of reorganization is dependent upon a number of conditions typical in similar reorganizations, including court approval of the plan and related solicitation materials and approval by the requisite stakeholders of RCN. In addition, the financing to be provided by Deutsche Bank is subject to material conditions including confirmation of a plan of reorganization, no material adverse effect on the business, operations, financing or finances of RCN and its subsidiaries, no material change in market conditions or on the ability of Deutsche Bank to syndicate the new financing and the achievement of certain financial performance criteria. There can be no assurances that these conditions or the other conditions to the financing will be met. Additional terms and conditions of a plan of reorganization will be outlined in a Disclosure Statement which will be sent to creditors and security holders entitled to vote on the plan of reorganization after it is approved by the bankruptcy court. RCN is represented by AlixPartners, LLC, The Blackstone Group, L.P., and Skadden, Arps, Slate, Meagher & Flom, LLP. For additional information about the restructuring process, please visit http://www.rcntomorrow.com/ ----------------------------------------------------------------- [00004] RCN DEBTORS' CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtors filing separate Chapter 11 petitions: Case No. Debtor Entity -------- ------------- 04-13637 Hot Spots Productions, Inc. 04-13638 RCN Corporation 04-13639 RLH Property Corporation 04-13640 RCN Finance, LLC 04-13641 TEC Air, Inc. Chapter 11 Petition Date: May 26, 2004 Bankruptcy Court: United States Bankruptcy Court Southern District of New York Alexander Hamilton Custom House One Bowling Green, 5th Floor New York, New York 10004-1408 Telephone (212) 668-2870 Bankruptcy Judge: The Honorable Robert D. Drain Circuit: Second Debtors' Bankruptcy Counsel: Jay Goffman (JG 6722) Frederick D. Morris (FM 6564) SKADDEN, ARPS, SLATE, MEAGHER & FLOM, LLP Four Times Square New York, NY 10036-6522 Telephone (212) 735-3000 Debtors' Regulatory Counsel: Jean L. Kiddoo, Esq. Russell M. Blau, Esq. L. Elise Dieterich, Esq. Charles A. Rohe, Esq. Philip J. Macres, Esq. Jeffrey Strenkowski, Esq. Elise Scherr Frejka, Esq. SWIDLER BERLIN SHEREFF FRIEDMAN, LLP The Washington Harbour 3000 K Street, NW, Suite 300 Washington, DC 20007-5116 Telephone (202) 424-7500 Fax (202) 424-7645 - and - SWIDLER BERLIN SHEREFF FRIEDMAN, LLP The Chrysler Building 405 Lexington Avenue New York, NY 10174 Debtors' Financial Advisor: Timothy R. Coleman Senior Managing Director THE BLACKSTONE GROUP, L.P. 345 Park Avenue New York, NY 10154 Telephone (212) 583-5000 Debtors' Crisis Manager: John S. Dubel Anthony M. Horvat Gary Schafer AP SERVICES, LLC 2000 Town Center, Suite 2400 Southfield, MI 48075 Telephone (248) 358-4420 Debtors' Claims Agent: Ron Jacobs President BANKRUPTCY SERVICES, LLC 757 Third Avenue, Third Floor New York, NY 10017 Telephone (212) 376-8902 Debtors' Noticing, Voting & Information Agent: Jane Sullivan Director INNISFREE M&A INCORPORATED 501 Madison Avenue, 20th Floor New York, NY 10022 Debtors' Accountants and Auditors: PRICEWATERHOUSECOOPERS, LLP Secured Lenders' Counsel: Peter V. Pantaleo, Esq. Elisha D. Graff, Esq. SIMPSON THACHER & BARTLETT, LLP 425 Lexington Avenue New York, NY 10017 Ad Hoc Senior Unsecured Noteholders' Committee's Counsel: MILBANK, TWEED, HADLEY & MCCLOY, LLP Ad Hoc Senior Unsecured Noteholders' Committee's Finanical Advisor: CHANIN CAPITAL PARTNERS Ad Hoc Senior Unsecured Noteholders' Committee's Operational Advisor: COMMUNICATION TECHNOLOGY ADVISORS, LLP U.S. Trustee: Paul K. Schwartzberg, Esq. Office of the United States Trustee 33 Whitehall Street, Suite 2100 New York, NY 10004 Telephone (212) 510-0500 ----------------------------------------------------------------- [00005] LIST OF THE DEBTORS' 17-LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature Of Claim Claim Amount ------ --------------- ------------ HSBC Bank USA Indenture Trustee $315,995,000 452 Fifth Avenue for the 11.125% New York, New York 10018 Senior Discount Attn: Issuer Services Notes due 2007 Tel.: (212) 525-1324 Fax: (212) 525-1366 HSBC Bank USA Indenture Trustee 290,289,000 for the 9.8% Senior Discount Notes due 2008 HSBC Bank USA Indenture Trustee 202,871,000 for the 10.125% Senior Notes due 2010 HSBC Bank USA Indenture Trustee 160,879,000 for the 10.0% Senior Notes due 2007 HSBC Bank USA Indenture Trustee 139,472,000 for the 11.0% Senior Discount Notes due 2008 Bombardier, Inc. 3819 Collections Center Dr. Chicago, Illinois 60693 Tel: 1-514-855-5420 Fax: 1-514-855-8385 Trade 194,126 Affinitas Corporation 233 South 13th St. Suite 1200 Lincoln, NE 68508-2026 Tel: 402-397-7077 Fax: 402-397-7576 Trade 60,284 Nextel Communications 59 Maiden Lane New York, NY 10038 Tel: 646-458-9556 Fax: 646-458-3597 Trade 9,170 Boise Cascade Office Products 150 East Pierce Road Itasca, IL 60143 Tel: (800) 472-6473 Fax: (800) 572-6473 Trade 7,218 Sony Music Studios 460 West 54th Street New York, NY 10019 Tel: (212) 833-7633 Fax: (212) 833-8901 Trade 2,039 Gels Film Lighting Pty, Ltd 12 Maralinga Ave. Elanora Heights Sydney, Australia NSW 2101 Tel: 02-9913-3169 Fax: (718) 386-7846 Trade 1,287 Encore 6344 Fountain Ave. Hollywood, CA 90028 Tel: (323) 466-7663 Fax: (323) 467-5539 Trade 1,031 Warrenwood Studios 3825 W. Burbank Blvd. Burbank, CA 91515 Tel: (818) 563-1263 Fax: (818) 526-8963 Trade 880 Nortel Networks PO Box 75523 Charlotte, NC 28275 Tel: (703) 753-1600 Fax: (919) 997-6659 Trade 466 Pitney Bowes 1835 Underwood Blvd. Delran, NJ 08075 Tel: (856) 764-2296 Fax: 973-575-9099 Trade 362 Universal Access 135 South LaSalle Dept. 4771 Chicago, IL 60674 Tel: 312-660-5000 Fax: 312-660-6050 Trade 250 Hello World Communications 118 West 22nd Street New York, NY 10011 Tel: (212) 243-8800 Fax: (212) 691-6961 Trade 72 ----------------------------------------------------------------- [00006] LIST OF THE DEBTORS' 5-LARGEST SECURED CREDITORS ----------------------------------------------------------------- Entity Claim Amount ------ ------------ Silver Point Capital c/o JPMorgan Chase Bank 380 Madison Avenue New York, New York 10017 Attention: Mary Ellen Egbert Fax: (212) 622-4834 $55,139,386 Canyon Capital Advisors, LLC c/o JPMorgan Chase Bank $33,181,362 TRS Callisto, LLC c/o JPMorgan Chase Bank $29,936,764 Deutsche Bank AG c/o JPMorgan Chase Bank $24,896,934 Evergreen Investment Management Company, LLC c/o HSBC Bank USA Issuer Services 452 Fifth Avenue New York, New York 10018 $27,521,000 ----------------------------------------------------------------- [00007] DEBTORS' MOTION FOR AUTHORITY TO USE CASH COLLATERAL ----------------------------------------------------------------- Under the Senior Credit Agreement dated as of June 3, 1999, among RCN Corporation, certain of its subsidiaries, the Senior Lenders and JPMorgan Chase, a consortium of Senior Lenders made loans and other financial accommodations to or for the benefit of RCN and its Affiliates. The Senior Lenders say they're owed $432,500,000 (plus accrued and unpaid interest thereon) plus $15,000,000 on account of letter of credit reimbursement obligations. The Senior Lenders assert that their loans are fully secured and they have the right to seize all cash on deposit at PNC Bank, N.A., and intercept all amounts generated by the collection of the Debtors' accounts receivable. To pay their postpetition bills as they become due, the Debtors need access to their Senior Lenders' cash collateral. In the next 30 days, the Debtors project: DEBTORS' ESTIMATED CASH RECEIPTS AND DISBURSEMENTS FOR THE 30-DAY PERIOD From May 26, 2004 through June 25, 2004 Beginning Cash Balance $0 ---------- Cash Receipts: Cash Fundings (Transfers in/out) 5,000,000 Operating Receipts 0 ---------- Subtotal 5,000,000 Cash Disbursements Operating Disbursements - Payroll - Professional Fees (500,000) Legal Fees (450,000) Creditor Advisor Fees (624,000) Directors Fees (20,000) Other General & Administrative (700,000) ---------- Subtotal (2,294,000) ---------- Ending Cash Balance $2,706,000 ========== Accordingly, with consent from JPMorgan Chase and the Senior Lenders, the Debtors ask Judge Drain for immediate authority to use up to $5,000,000 of the Lenders' Cash Collateral. The Debtors assure the Court that their interim use of Cash Collateral will be limited to amounts required to avoid immediate and irreparable harm to the estates pending a hearing on entry of the Final Cash Collateral Order. The Debtors tell Judge Drain that they do not have sufficient available sources of working capital and financing to carry on the operation of their businesses without the use of Cash Collateral. The Debtors will return to court in June asking the Court to enter a Final Cash Collateral Order. At that time, the Debtors will ask the Court to approve continued use of the Lenders' Cash Collateral to fund both Debtor and Non-Debtor cash requirements: RCN CORPORATION AND SUBSIDIARIES U.S. Operations Cash Flow Budget for the Period From May 23, 2004 to August 28, 2004 Operating Cash Flow Debtors Non-Debtors ------------------- ------- ----------- Operating Receipts: Trade Receivables Collections $139,341,311 Sublease Cash Receipts 3,807,292 StarPower Reimbursement 4,863,178 Other Receipts (net) $5,000,000 (6,804,160) ---------- ------------ Subtotal Operating Receipts 5,000,000 141,207,620 Operating Disbursements: Operating Expenses (68,267,560) Rents, Leases & Property Costs (11,119,244) Taxes (15,489,008) Insurance & Legal (3,323,779) Other Expenses (13,211,279) Inventory & CapEx (19,513,937) ---------- ------------ (130,924,808) Payroll Disbursements: Salaries & Wages (20,998,727) Taxes & Other (11,299,172) ---------- ------------ (32,297,898) ---------- ------------ Subtotal Operating Disbursements (163,222,705) ---------- ------------ Subtotal Operating Cash Flow 5,000,000 (22,015,085) Restructuring Cash Flow ----------------------- Professional Fees (2,766,000) (6,188,000) Operating & Other (720,000) (46,855,615) ---------- ------------ Subtotal Restructuring Cash Flow (3,486,000) (53,043,615) ---------- ------------ Net Inflow / (Outflow) $1,514,000 ($75,058,700) ========== ============ ----------------------------------------------------------------- [00008] ORGANIZATIONAL MEETING TO FORM OFFICIAL COMMITTEES ----------------------------------------------------------------- The United States Trustee for Region 2 will convene a meeting of the Debtors' largest unsecured creditors within the next week or two for the purpose of forming a committee of unsecured creditors in RCN's Chapter 11 cases. The meeting will be held at: THE OFFICE OF THE UNITED STATES TRUSTEE 80 Broad Street, Second Floor New York, New York 10004 This is not the meeting of creditors pursuant to Section 341 of the Bankruptcy Code. That meeting, required in all bankruptcy cases, will be held at a later date. A representative of the Debtors will attend the organizational meeting and provide background information regarding the cases, but not under oath. The Prepetition Noteholder Group will, predictably, encourage the U.S. Trustee to appoint its members to the Official Committee under 11 U.S.C. Sec. 1102(b)(1). The test for that appointment is whether the U.S. Trustee is persuaded that the prepetition committee was fairly chosen and is representative of the different kinds of claims to be represented. Contact Paul K. Schwartzberg, Esq., at (212) 510-0500 to obtain a statement of willingness to serve on a committee and for any additional information about this meeting. *** End of Issue No. 1 ***