Copyright 2004 The Deal, L.L.C.
Daily Deal/The Deal
December 1, 2004 Wednesday
Chicago seems to have leaned on RCN Corp., reaching a settlement that gives the city $3.45 million and access to 10 dedicated underground fiber-optic strands.
The settlement also cancels agreements that required RCN to develop a cable network in different areas of the city. RCN now only has to serve homes and businesses already connected to its network.
While RCN seems to be have gotten the short end of the deal, settling the lawsuits between the city and Chicago’s RCN Cable TV removes a hurdle ahead of the confirmation of RCN’s reorganization plan, which was filed in October.
According to the settlement, RCN will pay the city a lump sum of $3.45 million and retain operations in two areas of the city.
Chicago also gains access to four dark, or unused, network strands in one area and six in the other.
Debtor counsel at Skadden, Arps, Slate, Meagher & Flom LLP have filed a motion to file the dark-fiber agreement under seal to protect RCN’s business interests.
RCN Corp. filed for Chapter 11 protection on May 27, but its Chicago subsidiary, RCN Cable TV of Chicago Inc., didn’t file until Aug. 5.
The cases were then jointly administered in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan.
When RCN-Chicago filed, it was already embroiled in arguments with the city over its failure to fulfill its contract. In 2001 the cable provider agreed to install cable systems in four different areas of the city under rotating schedules.
But worsening financial conditions made it clear that keeping to the schedules would be impossible, and the city and RCN amended the agreements in late November 2002. RCN had been able to develop Area 1 and expand into Area 2, but no progress has been made in Areas 3 and 4.
By December 2003, RCN’s condition continued to spiral down, and the company filed a petition to modify the agreements again. Soon after this, the city began to impose fines on RCN for noncompliance and rejected a plea to modify the agreements on Feb. 23. The fines amounted to about $750 per customer a day of noncompliance, or $1 million daily.
The two parties negotiated until RCN filed for bankruptcy. RCN quickly filed an injunction for temporary relief. Talks continued, and the parties reached agreement on Nov. 12.
A hearing on the settlement will be held Thursday, and a hearing to confirm the RCN reorganization plan is scheduled for Dec. 8.
D.J. Baker and Frederick D. Morris represent RCN at Skadden Arps.