TerreStar (News - Alert) Corporation’s subsidiary TerreStar Networks, Inc., and other affiliates have filed for Chapter 11 under the U.S. Bankruptcy Code to re-organize and eventually strengthen its financial position and remain in the mobile satellite services market.
Through the restructuring, TerreStar Networks (News - Alert) hopes to lessen its debt obligations.
The goal of the company is to place greater focus on delivering “always available” mobile communications through its recent launch of the world's first integrated satellite-cellular smartphone.
In a statement released this week, Jeffrey W. Epstein, president and chief executive officer of TerreStar, said, "After careful consideration of all available alternatives, we determined filing Chapter 11 was a necessary and prudent step to strengthen our balance sheet and gain financial flexibility in order to access liquidity and position TerreStar Networks as a stronger, healthier company."
Concurrently with its Chapter 11 filing, TerreStar Networks has entered into an agreement with EchoStar Corporation, its largest secured creditor, to provide the company with a $75 million debtor-in-possession financing facility.
TerreStar Networks will use the debtor-in-possession financing to maintain business-as-usual operations during the restructuring process.
The company said it believes its current and anticipated cash resources will be sufficient to pay its expenses and maintain its business operations during the Chapter 11 process.
“As part of this initiative, and as a result of receiving our debtor-in-possession financing facility, we will be able to conduct business-as-usual with customers and partners, and ensure the highest customer service is provided throughout the reorganization," Epstein said.
TerreStar Networks has also entered into a restructuring support agreement with EchoStar Corporation, under which EchoStar has agreed to support a restructuring premised on a debt for equity conversion by the debtors' secured noteholders, and backstop a $100 million rights offering that will provide the funding for TerreStar Networks' exit from Chapter 11.
TerreStar Networks said it believes that the restructuring support agreement will provide the foundation for an expeditious emergence from Chapter 11.
"The commitment EchoStar has made to support our restructuring will allow us to maximize value for all of our stakeholders and allow us to emerge from Chapter 11 on an expedited time frame," Epstein said.
For more information about the restructuring, TerreStar Networks has set up a restructuring website at or call the restructuring hotline at 866-682-1770.Ed Silverstein is a TMCnet contributor. To read more of his articles, please visit his columnist page.
Edited by Tammy Wolf