As part of its restructuring process in Chapter 11 bankruptcy protection, mobile satellite services operator Terrestar Networks has put its assets up for sale.
The reason behind the move, referred to in the bankruptcy court filing documents as the…
As part of its restructuring process in Chapter 11 bankruptcy protection, mobile satellite services operator Terrestar Networks has put its assets up for sale.
The reason behind the move, referred to in the bankruptcy court filing documents as the ‘alternative transaction’, is to both ascertain the current market value of Terrestar’s assets and to potentially lead to an offer for any or all of those assets that would generate greater value for the company’s creditors than the joint restructuring plan with EchoStar.
The assets that are subject to this alternative transaction are the US and Canadian S-band ATC operational licences, the rights to the TerreStar-1 and TerreStar-2 satellites and the company’s existing satellite communications network assets.
Blackstone, which has been advising Terrestar Networks both before and during it filing for bankruptcy protection, is the primary point of contact for the sales process.
Under Terrestar and EchoStar’s proposed Restructuring Support Agreement, the approximate 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, 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. The hearing at the US Bankruptcy Court Southern District of New York to approve the plan is scheduled to take place on December 10.
EchoStar also agreed to provide Terrestar with up to US$75m in junior secured debtor-in-possession financing. On November 18, the Bankruptcy Court Judge, Sean Lane, approved this DIP financing and by November 29, Terrestar had drawn approximately US$18m of it.
