Thursday, October 21, 2010 4:15 PM EDT Terrestar Gets $75M Lifeline From Echostar
International Business Times http://www.ibtimes.com/articles/74557/20101021/terrestar-files-for-bankruptcy.htm Terrestar, which filed for bankruptcy this week, has arranged a $75 million lifeline from Echostar, and will be allowed to borrow up to $18 million to keep the company operating while it works out a restructuring plan with its lenders. The company, which planned to operate a combined satellite-terrestrial communications network, filed for chapter 11 protection on Oct. 19. The first hearing was the next day in the Bankruptcy Court of the Southern District of New York. The court approved Terrestar's debtor-in-possession financing of $75 million, provided by Echostar, which owns the majority of the company's debt. Terrestar has more than $1.2 billion in debt that has ballooned over the years. In 2007 Terrestar Networks issued $500 million in bonds that carried a 15% interest rate. The next year it issued $150 million in convertible bonds with a rate of 6.5%. Both sets of notes are due in 2014, and the exchangeable bonds convert to equity at $5.57 per share. Terrestar's stock has traded below $1.50 since the beginning of the year, though the publicly traded Terrestar Corporation did not file for bankruptcy. One of the company's major backers is Harbinger Capital Partners. Along with EchoStar, a satellite equipment provider, Harbinger provided a $100 million line of credit to finance Terrestar's second satellite launch. Terrestar investors also hold $408 million in preferred stock. As the company restructures, a big question will be the total value of the company's assets. In a regulatory filing on June 30, the company listed the spectrum licenses in the 2GHz and 1.4GHz bands as worth $177.4 million and $209 million, respectively. Property, equipment, and the terrestrial network were valued at $1.02 billion. Terrestar launched its first satellite last year. In the bankruptcy hearing, Terrestar's lawyers said the second satellite was "95% completed." The company has a complex structure, with over a dozen subsidiaries and affiliates of the parent company, Terrestar Corporation, filing for chapter 11. Owners of the 6.5% notes and preferred shares objected to the corporate entities above Terrestar Networks being guarantors of the debt and being included as debtors in the chapter 11 case. That objection was shot down. Echostar has said it is willing to accept conversion of the debt to equity and has signed a written agreement to that effect, but not enough of the other bondholders have yet done so, according to a person familiar with the company. Terrestar Chief Executive Officer Jeffery Epstein said in a court filing that Terrestar has been exploring restructuring options since April. The company hired Blackstone Advisory Partners, a restructuring firm, in August. In his statement, Epstein said that while the company made an effort to negotiate with creditors, eventually it decided that securing additional financing in a debtor-in-possession arrangement was the better path. "TerreStar determined that this path was the most viable restructuring alternative and would increase the likelihood of emerging from the restructuring process with a healthy balance sheet and adequate financing to continue the marketing of its network and the further development of necessary technological innovations," Epstein said. One person familiar with Terrestar said it is likely the greater portion of the company's value is in the 2GHz spectrum, and that it would probably be a good idea for the company to seek a major carrier to partner with or even buy the company outright. He noted that from a technical standpoint, the satellites Terrestar uses are state of the art. Calls to Terrestar and the company's financial adviser, Blackstone Advisory Partners, were not returned. The next hearing is scheduled for Nov. 9. -- ================================================= George Antunes Voice (713) 743-3923 Associate Professor Fax (713) 743-3927 Political Science Mail: antunes at uh dot edu University of Houston Houston, TX 77204-3011 _______________________________________________ Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
