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Elektrobit settles with TerreStar

Elektrobit Inc., a subsidiary of Elektrobit Corporation ("EB"), and TerreStar Corporation and certain of its preferred shareholders, entered into a conditional agreement of settlement of the various disputes between them in TerreStar Corporation Chapter 11 reorganization cases.

TerreStar Corporation has filed a motion seeking approval from the United States Bankruptcy Court for the terms and conditions set forth for the Settlement and authorization to TerreStar Corporation to enter into the Settlement. Additionally, TerreStar Corporation has filed a motion seeking an approval for new financing to enable TerreStar Corporation to satisfy its obligations under the proposed Settlement. According to the Settlement, if conditions to its effectiveness are fulfilled, TerreStar Corporation shall be obligated to pay to Elektrobit Inc., an immediate cash payment of USD 13.5 million (EUR 10.9 million as per exchange rate of August 2, 2012) in full and final satisfaction of its claim against TerreStar Corporation and in resolution of all disputes between EB and the other parties in the TerreStar Corporation reorganization cases. The Settlement does not include the TerreStar Networks Chapter 11 cases, which remain pending, and does not include any distribution therefrom that may be available for EB. The implications of the TerreStar Corporation and TerreStar Networks Chapter 11 cases on EB's profit, financial position and outlook can be finally determined only when the outcome of both Chapter 11 cases is known, including all costs related to collecting the receivables, and e.g. confirmed tax treatment. If approved by the Bankruptcy Court and funded by TerreStar Corporation, the Settlement Payment in the TerreStar Corporation Chapter 11 cases alone, and without any further distribution from the TerreStar Networks Chapter 11 cases, would result a positive effect of  approximately USD 1.6 million (EUR 1.3 million as per exchange rate of August 2, 2012) on EB's result and a positive effect on EB's cash flow of approximately USD 13.0 million (EUR 10.5 million as per exchange rate of August 2, 2012) after estimated tax effects. If the Settlement is approved by the Bankruptcy Court and TerreStar Corporation receives the requested new financing, the Settlement Payment would be paid within two business days after the Settlement becomes effective by its terms, i.e. during the third year quarter of 2012. On October 19, 2010, TerreStar Networks and certain other affiliates of TerreStar Corporation and on February 16, 2011, the parent company TerreStar Corporation filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code to strengthen their financial position.   EB has claimed its receivables in the amount of approximately USD 25.8 million (EUR 20.9 million as per exchange rate of August 2, 2012), in the Chapter 11 cases of both TerreStar Networks and TerreStar Corporation. In addition to the booked receivables, EB has also claimed additional costs in the amount of approximately USD 2.1 million (EUR 1.7 million as per exchange rate of August 2, 2012) and resulting mainly from the ramp down of the business operations between the parties. Thus, EB has asserted claims against each of the TerreStar entities in amounts totaling USD 27.9 million (EUR 22.6 million as per exchange rate of August 2, 2012). Due to uncertainties related to the accounts receivable, EB booked an impairment of the accounts receivable in the amount of EUR 8.3 million during the second half of 2010.

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March 28 2024 10:16 am V22.4.20-1
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