US mobile satellite firm TerreStar Networks has filed for Chapter 11 protection, striking a $75 million (€54.2 million) deal with Echostar in a bid to survive.
Echostar, TerreStar’s biggest creditor, has agreed to provide the sum in the form of a debtor-in-possession loan that will enable the operator to continue operating while it restructures.
The US satellite firm has also agreed to back a restructure based on a debt for equity conversion by the secured note holders, and to underpin a planned $100 million rights offering.
TerreStar, which is majority owned by TerreStar Corp, had assets of $1.4 billion and liabilities of $1.6 billion by end 1H10.
The firm last month began selling what it said was the world’s first integrated cellular-satellite smartphone.
It began offering services early this year and at June 30 had recorded a $129 million loss for the first six months on $6.2 million in revenue.
CEO Jeffrey Epstein 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.”