TerreStar wins court approval of disclosure statement, DIP financing

By Caroline Salls

Pittsburgh, Aug. 24 - TerreStar Corp. received court approval of the disclosure statement for its third amended plan of reorganization, according to an Aug. 24 filing with the U.S. Bankruptcy Court for the Southern District of New York.

The plan confirmation hearing is scheduled for Oct. 10.

In addition to TerreStar Corp., the debtors also include Motient Communications Inc., Motient Holdings Inc., Motient License Inc., Motient Services Inc., Motient Ventures Holding Inc., MVH Holdings Inc., Terrestar Holdings Inc. and Terre star New York Inc.

Creditor treatment

Creditors will be treated as follows under the amended plan:

• Holders of administrative claims, debtor-in-possession claims, priority tax claims, other priority claims and convenience claims will be paid in full in cash;

• Holders of other secured claims will receive a cash payment;

• Holders of bridge loan claims will be paid in full in cash, minus any interest that has accrued as a result of a continuing default;

• The holder of the Sprint settlement claim will receive cash equal to the difference, if any, between $2.6 million and the amount paid to Sprint by the TerreStar Networks' debtors on account of an intercompany funding claim.

If the allowed amount of the Sprint settlement claim exceeds the total amount actually received by TerreStar Corp. on account of the intercompany funding claim, the holder of the Sprint settlement claim will receive only cash in an amount equal to the total amount received by TerreStar Corp.;

• Holders of general unsecured claims against TerreStar Corp. and TerreStar Holdings will receive either new TerreStar Corp. notes equal to 100% of their claim or be paid in full in cash with post-bankruptcy interest at the federal judgment rate, at the option of the debtor.

However, in the event of the sale and/or liquidation of all or substantially all of the TSC debtors' assets, these creditors will be paid in full in cash plus post-bankruptcy interest at the federal judgment rate;

• Holders of unsecured claims against the other debtors that are not also holders of claims against TerreStar Corp. and TerreStar Holdings or whose claim against the other debtors is greater than its claim against TerreStar and TerreStar Holdings will either be paid in full in cash with post-bankruptcy interest at the federal judgment rate or receive a share of equity in the reorganized entity corresponding to the claim;

• Holders of intercompany claims, preferred series C, preferred series D and preferred series E TerreStar Corp. interests and other TerreStar Corp. equity interests will receive no distribution; and

• Holders of preferred series A and preferred series B TerreStar Corp. interests will receive a share of new common stock, provided, however, that in the event of the sale and/or liquidation of all or substantially all of the TSC debtors' assets, these preferred interest holders will receive a share of the sale distribution.

DIP financing

In addition, TerreStar Corp. and TerreStar Holdings received court approval to obtain $16.5 million in debtor-in-possession financing.

Motient Ventures Holding Inc. is the guarantor for the TerreStar debtors.

NexBank SSB is the DIP loan agent.

According to the Aug. 24 order, $13.5 million of the financing will be used to make a settlement payment to Elektrobit, Inc.

The DIP facility will mature on the earliest of six months, the effective date of the borrowers' Chapter 11 plan and the completion of a sale of all or substantially all of the borrowers' assets.

Interest will be 10.5%.

The company said the financing will provide the funding needed to further its reorganization efforts and emerge from bankruptcy.

TerreStar Corp. and TerreStar Holdings are subsidiaries of TerreStar Networks Inc., a Reston, Va.-based holding company with subsidiaries that operate satellite-based digital mobile communications systems. TerreStar Corp. And TerreStar Holdings filed for bankruptcy on Feb. 16, 2011. Their Chapter 11 case number is 11-10612.

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