EchoStar and Terrestar Networks have terminated their restructuring support plan by mutual agreement. At the same time, Terrestar Networks’ parent company Terrestar Corporation has also filed for bankruptcy protection.
No reason was given for the…
EchoStar and Terrestar Networks have terminated their restructuring support plan by mutual agreement. At the same time, Terrestar Networks’ parent company Terrestar Corporation has also filed for bankruptcy protection.
No reason was given for the cessation of the agreement, however, SatelliteFinance understands that the two parties are still pursuing a revised sale of Terrestar Networks to EchoStar.
A major factor is likely to be demands from Terrestar’s other creditors that the company seek alternative takeover offers to maximise value. An ongoing asset sale is currently taking place, and in late January, Terrestar Networks requested a 120 day extension to the exclusivity periods during which only it may file a Chapter 11 plan, arguing that it needs more time for the sales process.
It stated: “Concurrently with the plan process, the TSN Debtors (Terrestar Networks) are conducting a comprehensive and robust marketing process in an effort to consummate a sale of any or all of the TSN Debtors’ assets that will maximize value for all stakeholders. At this point, and as a result of such sale process as well as other contested items in the cases, the TSN Debtors do not know whether they will need to avail themselves of an extension of the Exclusive Periods to file another plan or solicit votes thereon.
“Accordingly, because the present Exclusive Filing Period expires on 16 February 2011, prudence dictates seeking an extension of the Exclusive Periods in the event additional time is needed to obtain confirmation of the (restructuring) plan or to draft a revised chapter 11 plan and solicit votes thereon for the TSN Debtors.” At the end of 2010, rumours emerged that US wireless network provider MetroPCS was eyeing up some of Terrestar’s assets.
Following Terrestar Networks filing for Chapter 11 protection on 19 October 2010, the company and its largest creditor EchoStar, which hold approximately US$1.1bn of pre-petition debt as well as a 16.41% equity interest, proposed a plan of reorganisation on 5 November. The restructuring agreement would see holders of the US$944m outstanding of the 15% Senior Secured PIK Notes, of which EchoStar currently owns more than 50%, convert their debt into 97% of the equity in Terrestar Networks. The remaining 3% would be owned by the holders of the exchangeable notes, which is predominantly Harbinger Capital Partners, and other unsecured claims.
An additional US$125m would then be raised via a rights offering with EchoStar agreeing to backstop US$100m of it.
Blackstone is Terrestar’s financial adviser for the process, while Akin Gump Strauss Hauer & Feld and Fraser Milner Casgrain are its legal counsels. Willkie Farr & Gallagher is legal counsel to EchoStar, with Weil, Gotshal & Manges counsel to Harbinger Capital Partners and Quinn Emanuel Urquhart & Sullivan representing the ad hoc group of the 6.5% senior exchangeable noteholders.
