Harbinger Capital Partners is seeking to block the EchoStar-led bankruptcy reorganisation plan for MSS operator Terrestar Networks by purchasing the company’s exchangeable notes.
Following the announcement on October 19 that Terrestar was to file for…
Harbinger Capital Partners is seeking to block the EchoStar-led bankruptcy reorganisation plan for MSS operator Terrestar Networks by purchasing the company’s exchangeable notes.
Following the announcement on October 19 that Terrestar was to file for Chapter 11 bankruptcy protection, Harbinger has purchased a significant portion of the satellite operator’s 6.5% senior exchangeable PIK notes in a series of transactions. By holding the majority of the exchangeable notes, Harbinger hopes to have a greater say over the reorganisation plan presented to the US Bankruptcy Court Southern District of New York.
Via its subsidiary Credit Distressed Blue Line Master Fund, Harbinger purchased approximately 21.25 million of Terrestar’s exchangeable PIK note securities on October 27. The hedge fund then made an additional purchase of 4.39 million securities on October 29. The notes, which are due 15 June 2014, have a conversion price of US$5.5741 per security.
Under the terms of the restructuring agreement between Terrestar and EchoStar, the US$944m outstanding of the 15% Senior Secured PIK Notes, of which EchoStar currently owns more than 50%, would be converted into 97% of the new preferred stock in Terrestar Networks with the remaining 3% held by the holders of the exchangeable notes, who are owed US$178.58m, and other unsecured claims. In the interim, EchoStar would provide Terrestar with a US$75m debtor-in-possession loan.
A court hearing regarding the reorganisation plan and deadline for proofs of claim will take place on 8 November, with a meeting of the Terrestar Networks creditors scheduled for 10 November at the office of the trustee, the US Bank National Association. Subsequently an initial case management conference will be conducted by the bankruptcy Judge Sean Lane on 16 November to consider the administration of the case, including the overall timetable and retention of professionals.
Terrestar has hired Akin Gump Strauss Hauer & Feld and Fraser Milner Casgrain as its legal counsels. Blackstone, which was hired back in August to help find new funding, continues to be Terrestar’s financial adviser. Weil, Gotshal & Manges is acting as counsel to Harbinger Capital Partners with Quinn Emanuel Urquhart & Sullivan counsel to an Ad Hoc group of the 6.5% senior exchangeable noteholders, and Willkie Farr & Gallagher counsel to EchoStar.