[SatNews] TerreStar Corporation (NASDAQ: TSTR) ("TerreStar") has announced that its majority-owned subsidiary TerreStar Networks Inc. and certain other affiliates have filed voluntary petitions for reorganization under chapter 11 of the U.S. Bankruptcy Code as part of a strategic plan to strengthen their financial position and achieve long-term success in the mobile satellite services market.

Through the restructuring, TerreStar Networks hopes to lessen its debt obligations in order to place greater focus on delivering the future of 'always available' mobile communications through its recent launch of the world's first integrated satellite-cellular smartphone.

Jeffrey W. Epstein, president and chief executive officer, TerreStar, said, "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." Concurrently with its chapter 11 filing, TerreStar Networks has entered into an agreement with EchoStar Corporation, its largest secured creditor, to provide the Company with a $75 million debtor-in-possession financing facility. TerreStar Networks will use the debtor-in-possession financing to maintain business-as-usual operations during the restructuring process. The Company believes its current and anticipated cash resources will be suitable to pay its expenses and maintain its business operations during chapter 11.

Epstein continued, "As part of this initiative, and as a result of receiving our debtor-in-possession financing facility, we will be able to conduct business-as-usual with customers and partners, and ensure the highest customer service is provided throughout the reorganization." In addition to the debtor-in-possession financing facility, TerreStar Networks has also entered into a Restructuring Support Agreement with EchoStar Corporation, under which EchoStar has agreed to support a restructuring premised on a debt for equity conversion by the Debtors' secured noteholders, and backstop a $100 million rights offering that will provide the funding for TerreStar Networks' exit from chapter 11. TerreStar Networks believes that the Restructuring Support Agreement will provide the foundation for an expeditious emergence from chapter 11.

Epstein concluded: "The commitment EchoStar has made to support our restructuring will allow us to maximize value for all of our stakeholders and allow us to emerge from chapter 11 on an expedited time frame."