TerreStar Networks inks settlement, clears path for Chapter 11 exit

By Caroline Salls

Pittsburgh, Nov. 15 - TerreStar Networks Inc. requested court approval of a settlement that resolves all of the outstanding disputes in its bankruptcy case and will provide the framework for a Chapter 11 plan, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The parties to the settlement include the company, its official committee of unsecured creditors, 15% and 6½% noteholder EchoStar Corp., an informal group of 15% noteholders, Harbinger Capital Partners Master Fund I, Ltd., Credit Distressed Blue Line Master Fund, Ltd., LightSquared Inc., LightSquared LP, Sprint Nextel Corp., Solus Alternative Asset Management LP and 15% notes trustee U.S. Bank NA.

"By the settlement, the debtors' estates will avoid potentially incurring millions of dollars in fees and expenses litigating the numerous pending and potential disputes in these cases and will be in a position to seek a swift and, importantly, consensual exit from Chapter 11," TerreStar said in the motion.

Settlement terms

Under the settlement

• The company will pay $128.49 million in full satisfaction of its 15% notes obligations on the earlier of two business days after the settlement is approved or Dec. 23;

• The company will pay $2 million to the current informal noteholder group members as reimbursement for their fees and expenses;

• All pending and potential lawsuits related to the 15% notes will be fully resolved by the payments;

• TerreStar will pay a distribution to Sprint in full satisfaction of its claims and withdraw a Sprint claims objection;

• TerreStar Corp. will have a $56.9 million allowed claim in satisfaction of its intercompany claim;

• Under a separate stipulation between Sprint and TerreStar Corp., Sprint will forego any distribution it would have received under the TerreStar Corp. plan and will instead receive an assignment of TerreStar Corp.'s rights to receive the first $2.6 million payable on the intercompany claim;

• TerreStar Networks will wire to Sprint $18 million in immediately available funds, plus the lesser of $2.6 million and the debtors' projected distribution on account of the TerreStar Corp. intercompany claim. If the Sprint TerreStar Corp. distribution is less than $2.6 million, then Sprint will have an allowed unsecured claim against TerreStar Corp. for the difference;

• All LightSquared Inc. claims will be settled in exchange for a $35 million unsecured claim against TerreStar Networks; and

• All LightSquared LP claims will be settled in exchange for a $5.99 million unsecured claim.

Sprint/DISH deal

According to the motion, the settlement has been made possible by a separate claim settlement between Sprint and DISH Network Corp.

Under the Sprint/DISH settlement, Sprint has agreed to accept no more than $20.6 million in full satisfaction of issues related to its claims provided that the amount is paid by Dec. 31.

Based in Reston, Va., TerreStar Networks is a holding company with subsidiaries that operate satellite-based digital mobile communications systems. The company filed for bankruptcy on Oct. 19, 2010. Its Chapter 11 case number is 10-15446.

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