updated 10:10 am EDT, Wed October 20, 2010
TerreStar files for Chapter 11 bankruptcy
As expected, satellite phone maker and carrier TerreStar Networks has filed for Chapter 11 bankruptcy, according to a Tuesday report. The company and 12 of its affiliates had more than $1 billion of liabilities, with $1.4 billion of assets and $1.64 billion of liabilities as of June 30. TerreStar's largest secured creditor, satellite TV provider EchoStar, will help TerreStar with $75 million of operating capital to keep it working through the bankruptcy.
EchoStar will also support a debt-for-equity restructuring and $100 million rights offering to help it safely exit Chapter 11 protection.
TerreStar launched its first satellite, TerreStar-1, in July 2009, and has been building a second, TerreStar-2. In September, it launched the Genus satellite smartphone at AT&T. Such devices have usually found acceptance difficult since they carry an access premium over regular cellphones and are mostly useful in remote areas where no cell service exists.