TerreStar Networks disclosure statement OK'd; plan hearing Feb. 13

By Caroline Salls

Pittsburgh, Dec. 21 - TerreStar Networks Inc. received court approval of the disclosure statement for its plan of reorganization, according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The plan confirmation hearing is scheduled for Feb. 13.

The plan is based on a settlement that resolves all of the outstanding disputes in TerreStar Networks' bankruptcy case.

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.

Settlement guidelines

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 $18 million in immediately available funds to Sprint, 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.

The company said last month that the settlement was made possible by a separate claim settlement between Sprint and DISH Network Corp. under which 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.

Creditor treatment

Treatment of creditors not included in the settlement terms include the following:

• Debtor-in-possession facility claims were repaid in full in cash under an August court order;

• Holders of other priority claims will be paid in full in cash;

• Holders of other secured claims will have their claims reinstated or be paid either in full in cash, with the proceeds of the sale of the collateral securing the claims or through the return of that collateral;

• Holders of unsecured claims will receive a share of liquidating trust interests and, at each claimant's option, either interim TerreStar Networks warrants or cash equal to the value of the interim warrants; and

• Equity interests will be cancelled and holders will receive no distribution.

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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