EchoStar cancels debt-for-equity restructuring of TerreStar Networks after Hughes purchase
By Paul Burton
February 22, 2011
TerreStar Corp., parent of bankrupt telecommunications company TerreStar Networks Inc., filed under Chapter 11 last Wednesday.
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The previous day, digital set-top box maker EchoStar Corp. canceled its proposed debt-for-equity restructuring deal with TerreStar Networks, one day after having announced a $1.33 billion agreement to purchase broadband services provider Hughes Communications Inc.
TerreStar Networks had abandoned its reorganization plan the same week and the U.S. Bankruptcy Court for the Southern District of New York canceled a confirmation meeting scheduled for next month. Under the plan, EchoStar would have controlled Reston, Va.-based TerreStar.
An ad-hoc group holding about $335 million of TerreStar Network 15% senior secured payment-in-kind notes due in 2014 had opposed the plan.
In a filing last Tuesday with the Securities and Exchange Commission, EchoStar, of Englewood, Colo., cited “mutual agreement of the parties” in terminating the plan.
Judge Sean Lane in Manhattan has granted a bridge order extending TerreStar Networks’ exclusive period to file a reorganization plan through March 9. At that point, only the ad-hoc group holding TerreStar 15% senior notes may file objections to extending exclusivity.
In court papers, TerreStar Corp. president and chief executive Jeffrey Epstein said the parent company had originally planned to file along with TerreStar Networks and its 12 affiliates—they filed Oct. 19—but preferred shareholders asked it not to file while they worked out a restructuring. The shareholders provided the company with about $4.3 million of bridge financing.
TerreStar Networks debtor counsel Akin Gump Strauss Hauer & Feld LLP filed court papers seeking joint administration of the bankruptcy cases, although its lawyers say the cases appear to be handled separately.
“It is contemplated that the plans of reorganization … will proceed according to separate timetables and will seek significantly different relief given the substantial differences between their businesses, stakeholders and the circumstances that required them to seek Chapter 11 relief,” the filing said.
TerreStar Networks provides mobile communications networks throughout the U.S., Canada, U.S. Virgin Islands and Puerto Rico.
Under the scuttled restructuring plan, EchoStar, one of TerreStar’s biggest backers, along with hedge fund Harbinger Capital Partners LLC of New York, would also have backstopped $100 million of a $125 million rights offering.
TerreStar began as Motient Corp. in 1988 and changed its name in 2007. It launched its TerreStar-1 satellite on July 1, 2009, but has produced little revenue from it. Its second one, TerreStar-2, is scheduled for completion in October 2011.
EchoStar said in a statement that acquiring Germantown, Md.-based Hughes, which sells satellite-based Internet services, will augment EchoStar’s capabilities for broadband transport of video and data. EchoStar CEO Michael Dugan, in the statement, called the deal “a unique and compelling fit.”
Fraser Milner Casgrain LLP of Toronto is Canadian counsel to TerreStar. Blackstone Advisory Partners LP, an affiliate of Blackstone Group LP, is the company’s financial adviser. Kirkland & Ellis LLP is representing the ad-hoc group."
"An ad-hoc group holding about $335 million of TerreStar Network 15% senior secured payment-in-kind notes due in 2014 had opposed the plan."
Source of Above
- So WHO Really, What are the names of those who "Opposed" the Echostar Plan? Coming Soon. " ad-hoc group"
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