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TerreStar creditor opposes lender interest payment withholding
By Caroline Salls
Pittsburgh, Oct. 3 - TerreStar Corp. creditor Jefferies & Co., Inc. objected to the company's proposed disclosure statement, arguing that the plan was not proposed in good faith, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.
Jefferies said there are only two classes of claims against debtor TerreStar Holdings under the plan of reorganization, one of which is held by bridge lenders and the other by Jefferies.
"Out of an apparent concern that Jefferies will vote against the plan and thereby render it unconfirmable, the debtors have, with the apparent consent of the bridge lenders, manufactured an impaired accepting class by not paying the bridge lenders a de minimis amount of default interest to which the TSC debtors' own financial projections and liquidation analysis make clear they have the ability to pay," Jeffries said in the filing.
Jefferies argued that the only explanation for the company withholding payment of the bridge lenders' default interest would be to impair the bridge loan claims artificially to circumvent the voting process, according to the filing.
In addition, Jefferies said the plan also violates the bankruptcy code's absolute priority rule because it provides a recovery to holders of preferred equity although the holders of unsecured claims are not being paid in full with interest.
A hearing is scheduled for Oct. 12.
TerreStar Corp. and TerreStar Holdings are subsidiaries of TerreStar Networks Inc., a Reston, Va.-based holding company with subsidiaries that operate satellite-based digital mobile communications systems. TerreStar Corp. and TerreStar Holdings filed for bankruptcy on Feb. 16, 2011. Their Chapter 11 case number is 11-10612.
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