TerreStar Networks filed for Chapter 11 bankruptcy protection and will try to restructure in the midst of an effort to launch an all-IP, integrated satellite-terrestrial network. The company's parent, publicly traded TerreStar Corporation, did not file for bankruptcy.
The company filed for bankruptcy in New York City and listed assets and debt each of more than $1 billion. TerreStar entered into an agreement with EchoStar Corporation, its largest creditor, to provide it with a $75 million debtor-in-possession financing facility. TerreStar Networks will use the financing to maintain its operations during the restructuring process. EchoStar, which is owed $857 million, according to regulatory filings, also will backstop $100 million for a rights offering that will give TerreStar funding as it exits from bankruptcy.
A recent report in the Wall Street Journal indicated that the company was preparing to enter into bankruptcy. The company had been working with creditors during the past few weeks to come up with a financing plan.
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 in August 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 $799 Genus smartphone just last month. In June 2009, AT&T announced plans to resell TerreStar's service.
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