Bankruptcy Court Approves EchoStar Loan Despite Complaints
A group of TerreStar affiliates won court approval of a large loan from EchoStar, allowing the bankrupt mobile satellite services provider to continue operation for the immediate future. The U.S. Bankruptcy Court in Manhattan approved the $75 million debtor-in-possession (DIP) financing despite complaints from several creditors over the terms of the financing. EchoStar is also backstopping a $100 million rights offering.
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Despite protests from debt holders, Judge Sean Lane allowed the loan to move forward largely as is. Marathon Asset Management had previously asked the court to dismiss the Chapter 11 case because TerreStar had not established “a real need and honest intent” to “achieve rehabilitation” through bankruptcy. Marathon raised concerns that other creditors would not be able to “stand in the way of EchoStar’s designs,” it said in filings to the court. EchoStar’s role in the bankruptcy is an attempt to pull out most of the value of TerreStar at “an unfair and unreasonable price,” it said. EchoStar is TerreStar’s largest debt-holder.
Marathon’s objections to the loan and reorganization plan hold no merit because it is a common stock shareholder of TerreStar Corp., the parent company, TerreStar said in response. Several companies, including Marathon and LightSquared owner Harbinger Capital Partners, had the chance to provide financing, said TerreStar. If a better financing offer becomes available, there is nothing that stops the debtors from taking out the EchoStar DIP agreement, it said.
The bankruptcy filing includes its in-orbit satellite, TerreStar-1, unfinished satellite, TerreStar-2 and 20 MHz of 2 GHz spectrum holdings. Parent company TerreStar Corp., which isn’t in bankruptcy, retains its 1.4 GHz holdings -- leased to Harbinger, for $2 million monthly. The bankruptcy of TerreStar and fellow S-band licensee DBSD, has led to speculation that the company would seek to sell their spectrum holdings or give them back to the FCC for a share of auction proceeds. Such an incentive auction would need congressional approval. TerreStar didn’t respond to requests for comment.