NEW YORK TerreStar Networks Inc, an operator of a mobile satellite network, filed on Tuesday for Chapter 11 bankruptcy protection after being weighed down by more than $1 billion of liabilities.
The Reston, Virginia-based company and 12 affiliates sought protection from creditors with the U.S. bankruptcy court in Manhattan, according to its petition. Its parent, TerreStar Corp TSTR.O, is not among the entities to seek court protection.
TerreStar had $1.4 billion of assets and $1.64 billion of liabilities as of June 30, according to a quarterly report filed with the U.S. Securities and Exchange Commission.
Formerly known as Motient Corp, TerreStar launched its first satellite, TerreStar-1, in July 2009, and has been building a second, TerreStar-2.
"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," Chief Executive Jeffrey Epstein said in a statement.
TerreStar has arranged for EchoStar Corp (SATS.O), a provider of satellite communications equipment and its largest secured creditor, to provide $75 million of financing to help it operate while in bankruptcy.
The company also said EchoStar will support a proposed debt-for-equity restructuring involving the company's secured noteholders and backstop a $100 million rights offering to help it emerge from Chapter 11.
A Blackstone Group LP (BX.N) affiliate is providing financial advice on the restructuring, TerreStar said.
TerreStar's largest outside shareholder is Harbinger Capital Partners, a hedge fund run by Philip Falcone.
The filing came four weeks after AT&T Inc (T.N) announced the launch of a satellite mobile service using TerreStar's Genus dual-mode smartphone.
TerreStar shares closed up 0.9 cents at 15.9 cents on the Nasdaq, Reuters data show.
The case is In re: TerreStar Networks Inc, U.S. Bankruptcy Court, Southern District of New York, No. 10-15446.
(Reporting by Jonathan Stempel and Matthew Goldstein in New York)