RCN Files Chapter 11

Rick Maloy: Downsizing to Rise Again

Contracts Awarded

Name Changes

Leaving Town


Corrections or additions?

This article by Barbara Fox was prepared for the June 2, 2004 edition of U.S. 1 Newspaper. All rights reserved.

Life in the Fast Lane

Those who hope to decrease congestion on Route 1 and critical crossroads will welcome progress on a Bus Rapid Transit (BRT) system. Though installation of BRT could take 10 years, the approval process for it is underway. New Jersey Transit, the Central Jersey Transportation Forum, and a Bloomfield-based private firm named STV Inc. are conducting a 12-month alternative analysis plan for transit alternatives.

The planning team is ready to take the public’s ideas. New Jersey Transit hosts an open house on a Bus Rapid Transit alternative analysis study, on Saturday, June 5, from 11 a.m. to 3 p.m. at Quakerbridge Mall. NJT moves to West Windsor Town Hall, 271 Clarksville Road, on Tuesday, June 8, from 11 a.m. to 2 p.m. and 4 to 8 p.m. The open house will be held at Market Fair, Saturday, June 12, from 11 a.m. to 3 p.m. For information, call 800-772-2222.

BRT makes use of sleek high-tech vehicles resembling a hybrid bus/train that can travel on specially-designed “guideways” as well as regular roads. A BRT vehicle would be able to carry passengers over a dedicated right-of-way, such as an old railroad line, and then wheel through city centers and neighborhoods picking up riders. As BRT is envisioned, intersections would be realigned with dedicated bus lanes, and a BRT driver could signal the traffic light from a short distance away and trigger a green light to let the commuters through ahead of the cars.

BRT systems are operating successfully in such U.S. cities as Los Angeles, Pittsburgh, and Boston. Worldwide, BRT is working in Canada, Australia, and Brazil.

As proposed in 2002, Princeton’s BRT line would have a guideway on a strip between Route 1 and the Amtrak mainline from Lawrence to South Brunswick townships. Stops could include Quakerbridge Mall, a complex built on the Wyeth (formerly American Cyanamid) property, Carnegie Center, the Princeton Junction train station, Sarnoff’s office complex, the Merrill Lynch and Squibb complexes on Scudders Mill Road, Forrestal Center, and Ridge Road.

The BRT also could include a line that runs into downtown Princeton utilizing the existing Dinky Railroad or a bus that would run along the same route. The advantage of the bus over the train would be that, in the 20 minutes the train sits idly at the station, the bus could be moving through town, picking up passengers.

The service could be supplemented by “feeder routes” — bus lines throughout Mercer and lower Middlesex counties that tie into the main BRT line. This would make the Princeton Junction train station a major transportation hub — with cars, trains, and buses all coming together in one place.

Current costs per mile are estimated to range from $.7 million to $13 million. In comparison, light rail costs would be $34 million per mile. If the planning process goes well, meaning that officials from all the municipalities can agree on one plan, federal funding could be available.

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RCN Files Chapter 11

When a turnaround king, John Dubel, was brought in to restructure RCN, and when the Wall Street Journal printed CEO David McCourt’s opinion piece on the advantages of going bankrupt, everybody was just waiting for RCN to show up in bankruptcy court. On Thursday, May 27, RCN filed for Chapter 11 in the Southern District Court of New York.

RCN was among the first to offer bundled phone, cable, and high-speed internet services delivered over its own fiber-optic local network. In 2002 RCN’s Carnegie Center headquarters had more than 500 employees, and many of them held company stock. Nationally it now employs 2,600 workers and independent contractors, and 225 work at the Carnegie Center.

“We have reached a consensual agreement that we will use Chapter 11 as a tool to make us a healthy company,” says Barak Bar-Cohen, vice president of marketing and public relations.

RCN aims to eliminate $1.2 billion in bond debt that cost $140 million in interest payments last year. When RCN emerges from Chapter 11, which it hopes to do by the end of this year, current bondholders will hold stock and current stockholders will hold equity warrants.

That bondholders are willing to exchange bonds for equity shares, says Bar-Cohen, “is a real testament to the fact that they believe in our business and that we have the right business and the right strategy. Effectively they will be the new owners of the company.”

Stockholders are usually wiped out in Chapter 11 action. In an unusual move that could be some comfort to former RCN employees who saw the value of their shares drop from a high of more than $70 to pennies, RCN will give equity warrants to current stockholders. They will have what Bar-Cohen calls “an opportunity to share in the success of the future.” If and when RCN’s value climbs to $1.7 billion, they can use the equity warrants to obtain shares in the new company. Details of the agreement will be disclosed on or around July 1 (www.rcntomorrow.com).

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Rick Maloy: Downsizing to Rise Again

Richard A. “Rick” Maloy Jr. has restructured a five-generation insurance company for the second time. The first time, he was riding on the dotcom wave. Now he says he has recovered from the dotcom fall and is on an upward curve.

“We are growing fast, now that ripping the company back from national leases in real estate is behind us,” says Maloy in a telephone interview, the second interview with a U.S. 1 reporter within a week. (Maloy speaks about moderating a New Jersey Technology Council panel on self-insurance options on page 4). “We are focusing on production, and we will double revenue from last year. The premium volume that we did last year was about $17 million. This year we will nearly double the volume,” says Maloy.

At the height of the dotcom boom, Maloy claimed to have the only complete vertical plan for commercial insurance. He had 55 employees and was setting up call centers in five cities (U.S. 1, August 16, 2000). He dropped to 25 employees in 2001, and to 18 employees in 2002. He has gone from 13,000 to 3,500 square feet at Princeton Forrestal Village and has 13 people now.

In April, with the retrenching accomplished, he launched Maloy Risk Services as the main retail operation and relaunched InsureHiTech as a wholesale broker and a software platform.

InsureHiTech had had 400 clients, 90 percent of them technology firms, and now they are being served by Maloy Risk Services.

The technology platform of InsureHiTech had been used to streamline its own application processes. Now it is being licensed to other brokers. Also, as a wholesaler, the InsureHiTech company is helping other brokers to place insurance in markets they don’t usually reach. “Five or six brokers have found us,” says Maloy.

He has just renegotiated his lease so that Princeton Partners, which formerly sublet InsureHiTech’s space, now has the lease for the major part of the space. Maloy has a separate two-year lease for 2,900 square feet with Gale & Wentworth. He also retained his office in Manhattan.

Because his company specializes in technology firms, Maloy has assembled an impressive number of carriers from which his clients can choose. “We are known as people that can put technology insurance programs together.” The carriers include AIG, Chubb, Hartford, former Atlantic Mutual (One Beacon), St. Paul, Travelers, Gulf.

Dan McGrath is COO of Maloy Risk Services, which has 11 employees. Alex Beurle is the director of InsureHiTech, which has two people now. One of the senior developers has been brought back on a consulting basis. “We sat on it for a year, but we are building more functionality to our tech platform,” says Maloy. “We are selling the platform.”

To fund the development, Maloy used NOL money from the 2002 state tax program. (The NOL program allows tech companies that are losing money to sell their tax credits to profitable firms.) “We got $225,000 for the first quarter 2003 to pay our technology personnel, but once that money ran out, we didn’t get any of the tech projects we were working on.”

At present Maloy is using $75,000 from the operating budget of Maloy Risk Services for technology development, but he is also applying for $500,000 in additional NOL tax credits. If he gets it, he will rehire four or five members of the tech team.

Maloy emphasizes that his family has been in the insurance business for five generations and that he came to Princeton because his family had a three-generation affiliation with the family of Chip Parmele of Parmele, McDermott, Thomas, based at Research Park. The Maloy firm, which was founded on Staten Island, does business insurance, in contrast to Parmele’s company, which offers life, health, and benefits insurance.

“Chip Parmele, based in Princeton, had tremendous access to technology clients,” says Maloy, a 1991 graduate of Wake Forest. “When I started doing commercial insurance, I worked heavily with Chip and cut my teeth with clients that we co-brokered. We had enough volume in the Princeton office to set up an office. We were never in the same company, but we would go on joint calls together. That started us down the path on creating a specialty in technology.” Maloy still offers only commercial property casualty insurance and refers clients to other companies for life, health, and benefits policies.

A JP Morgan firm, Corsair, was a major investor in InsureHiTech, and in 2002, it was reported to own a 29 percent share. “We are one of four Internet plays that they had,” says Maloy. One was sold, two went out of business, and JP Morgan aims to get back a percentage of its investment in InsureHiTech, says Maloy. “To give us an incentive to stick around, JP Morgan has restructured with us and they have taken some additional equity. With our own cash flow and some additional funding, we are hoping to buy back the company completely.”

InsureHiTech Inc./Maloy Risk Services, 100 Village Boulevard, Suite 200, Princeton 08540. Richard A. Maloy Jr., president and CEO. 609-987-0221; fax, 609-987-0449. www.insurehitech.com

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Contracts Awarded

Genmab Inc. (GEN), 457 North Harrison Street, Princeton 08540. Lisa Drakeman, CEO. 609-430-2481; fax, 609-430-2482. www.genmab.com

Genmab’s treatment for a type of lymphoma has been designated an orphan drug by Europe’s equivalent of the Food and Drug Administration, the European Agency for the Evaluation of Medicinal Products (EMEA). Though Genmab has the rights to this drug in North and South America, it does not have the rights to this drug in Europe. A Japanese firm, Eisai, holds those rights. The drug, HuMax-CD4, can be used to treat cutaneous T-cell lymphoma.

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Name Changes

TNS Intersearch, Taylor Nelson Sofres, 101 College Road East, Princeton 08540. 609-919-2727; fax, 609-919-1191. www.intersearch.tnsofres.com

TNS Intersearch moved from 707 Alexander Road to 101 College Road East, and it has changed its name to TNS Healthcare. It offers full custom research services and national omnibus studies.

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Leaving Town

Sabinsa Corp., 1 Deer Park Drive, Princeton Corporate Plaza, Suite D, Monmouth Junction 08852. Kalyeanam Nagabhushanam, president R&D. 732-777-1111; fax, 732-777-1443. www.sabinsa.com

After eight years at Princeton Corporate Plaza, Sabinsa is consolidating and moving the R&D lab to Piscataway, where the administrative headquarters is located, says Dr. Kalyeanam Nagabhushanam, R&D director. With about 25 employees in New Jersey, it also has offices in Utah and India. The company does pharmaceutical research and manufacturing of nutritional and fine chemicals.

Lofberg Enterprises Inc, 14 Mercer Street, Hopewell 08525. Flemming Lofberg, president. 609-466-4466; fax, 609-466-7440. www.lofbergenterprises.com

Lofberg Enterprises has closed its office on Mercer Street. The phone has been disconnected but is still listed on the website. The company did general construction and construction management.

Prevent Blindness New Jersey, 2525 Route 130, Building C, Cranbury 08512. Maria Wagner. 609-409-0770; fax, 609-409-0755. www.preventblindnessnj

The New Jersey chapter of Prevent Blindness has merged with chapters in New York and Connecticut to form Prevent Blindness Tri-State, presently located at 984 Southford Road, Middlebury CT 06762 (800-850-2020).

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Lloyd Fletcher, 77, on May 23. He retired from Educational Testing Service as a test security specialist and had been executive director of the Mercer County Community Action Council.

Carl Geiger, 90, on May 25. He owned Princeton Construction Company in New Brunswick and had also owned Princeton Realty and Princeton Custom Homes.

Ludwig Rebenfeld, on May 26. The editor of the Textile Research Journal, he had been president of TRI/Princeton and a visiting lecturer at Princeton University. A memorial service will be Saturday, June 12, at 11:30 a.m. at the Princeton University Chapel.

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