Satellite Company Files For Chapter 11

RESTON, Va. (AP) -- TerreStar Corp., which operates the world's largest commercial satellite and recently started selling a satellite phone through AT&T Inc., filed for Chapter 11 bankruptcy protection on Tuesday in an effort to pare debt from its balance sheet.

TerreStar also said EchoStar Corp., its largest secured creditor, has agreed to provide $75 million in financing to help it continue to run its business while in bankruptcy court.

"After careful consideration of all available alternatives, we determined filing chapter 11 was a necessary and prudent step to strengthen our balance sheet and gain financial flexibility in order to access liquidity and position TerreStar Networks as a stronger, healthier company," President and CEO Jeffrey W. Epstein said in a statement.

EchoStar, a maker of equipment such as set-top boxes for satellite TV providers, has agreed to support a restructuring based on giving secured noteholders stock in exchange for debt, and a $100 million stock rights offering that would pay for TerreStar's exit from Chapter 11.

The satellite communications business is littered with bankruptcies, as companies load up on debt to put the hardware into orbit, then fail to keep up with debt service as customer projections prove too optimistic. Under its previous name, Motient Corp., TerreStar went through a bankruptcy proceeding in 2002.

In addition to EchoStar, Reston, Va.-based TerreStar's investors include private-equity firm Harbinger Capital Partners, which controls another satellite company, LightSquared.

In after-hours trading after the announcement, shares slid 8 cents after closing up a penny at 16 cents. The company's stock traded above $30 back in 2005, but steadily declined until plunging in 2008 during the market meltdown. The stock lost more than half its value Monday after The Wall Street Journal published word that the filing was possible, citing unnamed sources.
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