TerreStar, which is in the midst of launching an all-IP, integrated satellite-terrestrial network, is considering filing for Chapter 11 bankruptcy protection, according to a report in the Wall Street Journal, which cited unnamed sources familiar with the matter
The company could file for bankruptcy as soon as the next few days, but the filing could be delayed, the report said. TerreStar, weighed down by more than $1 billion in debt, has been working with creditors during the past few weeks to come up with a solution. One option, the report said, is that TerreStar could enter into a prearranged bankruptcy in which it could pursue a restructuring plan that has already been approved by some creditors.
The Journal said the company declined to comment.
Reuters reported in August that TerreStar was working with advisers from Blackstone Group to try to avoid filing for bankruptcy. One of TerreStar's creditors is Harbinger Capital Partners, the hedge fund that is owned by Philip Falcone and that is backing LightSquared, which is building its own wholesale LTE network using both terrestrial and satellite spectrum. However, according to the Journal, Harbinger's equity exposure to TerreStar is only $12 million; Reuters reported that Harbinger owns $150 million of TerreStar's debt.
TerreStar launched a satellite in 2009 and is building another, but its service has not really gotten off the ground. AT&T Mobility (NYSE:T) launched the company's long-awaited Genus smartphone just last month. AT&T announced its plans to resell TerreStar's service in June 2009.
The Genus, which provides dual-mode satellite and cellular service, is available to enterprise and government customers, and provides users who are able to get a line of sight to TerreStar's satellite ubiquitous voice and data roaming across the United States (including Alaska, Hawaii, Puerto Rico and the U.S. Virgin Islands and territorial waters).
However, the Genus comes with several caveats and a steep price tag. Users have to be outdoors to access the satellite service, and data speeds on the satellite service will be much slower than on AT&T's data network. The Genus costs $799 without a contract, but will require customers to sign up for AT&T's voice and mobile data plans. Additionally, users have to pay $25 per month extra for the ability to switch over to the satellite service--and users have to pay 65 cents per minute for voice calls via satellite and $5 per MB of data. The phone runs Windows Mobile 6.5 and has a full Qwerty keyboard and WiFi.
- see this WSJ article (sub. req.)
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