TerreStar again prolongs exchange offers for preferreds series, solicitation for 6.5% exchangeables

By Jennifer Chiou

New York, Feb. 5 - TerreStar Corp. and TerreStar Holdings Inc. extended their exchange offers for three series of preferred stock as well as the consent solicitation for one series of preferreds and $167 million of 6.5% senior exchangeable pay-in-kind notes due 2014, according to an 8-K filing with the Securities and Exchange Commission.

The expiration date was extended to 5 p.m. ET on March 5 from Feb. 4. It was previously extended from Jan. 6 and, before that, Dec. 15.

As already stated, the extension was made in order to provide additional time to satisfy some closing conditions.

As of Feb. 4, about 155,000 series B preferreds and no series A or series E preferreds had been tendered and holders of $22,492,279 principal amount of the 6.5% exchangeables had consented to the proposed amendments.

The results are unchanged from Jan. 4 except for the series B preferreds. Tenders had been received for 35,000 of those preferreds at the time.

The offers began on Nov. 16 after TerreStar canceled similar offers that began Oct. 9 and had been scheduled to expire on Nov. 10.

In the new offers, the companies are offering:

• Up to 90,000 shares of series F preferred stock in exchange for TerreStar's series A cumulative convertible preferreds;

• Up to 318,500 series F preferreds in exchange for TerreStar's series B cumulative convertible preferreds;

• Up to 300,000 series G junior preferreds in exchange for the company's series E junior participating preferreds.

Holders will receive one new preferred for each series A or series B preferred exchanged and one-quarter of a new preferred for each series E preferred exchanged, according to a schedule TO filing with the SEC.

The series F and series G preferreds will be issued by TerreStar Holdings.

TerreStar will issue up to 408,500 shares of the series B preferreds and up to 600,000 series E preferreds to TerreStar Holdings prior to the completion of the exchange offers.

Holders of the series F and series G preferreds issued in the exchange offer will be beneficial holders of the series B and series E preferreds issued to TerreStar Holdings, respectively.

The series B preferreds will mature June 30, 2014, at which time the series F preferreds will be redeemed.

Holders of series F preferreds will be entitled to receive the 7% dividends payable on the series B preferreds and to convert their beneficially owned series B preferreds into TerreStar common stock.

Holders of the series G preferreds will be entitled to convert each of their beneficially owned series E preferreds into 100 shares of TerreStar common stock.

Additionally, TerreStar is soliciting consents to amend the certificate of designation of the series B preferreds, and TerreStar and TerreStar Networks Inc. are soliciting consents to amend the indenture governing the 6.5% notes and approval from these noteholders of the exchange offers.

After giving effect to the 6.5% notes amendments, each $1,000 in principal amount of the 6.5% notes will be exchangeable for a number of series G preferreds equal to 1,000 divided by the product of (a) 100 and (b) 125% of the average of TerreStar's closing stock prices over the 10 trading days ending three days immediately prior to the close of the exchange offers.

Finally, TerreStar Holdings will issue 150,000 series G preferreds to EchoStar Corp. and another 150,000 series G preferreds to Harbinger Capital Partners and Harbinger Capital Management in exchange for their waiver of some fundamental rights as holders of series A, B, C and D preferreds and their consents under some other agreements.

Epiq Financial Balloting Group (646 282-1800) is the exchange and information agent.

Based in Reston, Va., TerreStar is a holding company with subsidiaries that operate satellite-based digital mobile communications systems.

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