Elektrobit Group Oyj - Elektrobit Corporation's subsidiary, Elektrobit Inc. received the settlement payment in the liquidation case of TerreStar Networks Inc.
August 29, 2014
Elektrobit Corporation's subsidiary, Elektrobit Inc. received the settlement payment in the liquidation case of TerreStar Networks Inc.
Stock exchange release
Free for publication on August 29, 2014 at 12.05 p.m. (CEST+1)
Elektrobit Corporation's subsidiary, Elektrobit Inc. received the settlement payment in the liquidation case of TerreStar Networks Inc.
On August 28, 2014, U.S. time, Elektrobit Inc. (EB), a subsidiary of Elektrobit Corporation, received a cash payment of USD 1,075,000 (EUR 0.8 million as per exchange rate of August 28, 2014) (the "Settlement Payment") in full and final satisfaction of its claim against TerreStar Networks Inc. ("TSN") and in resolution of all disputes between EB and The Liquidating Trust (the "Trust") of TSN, which was formed in connection with TSN's Bankruptcy Court-approved Chapter 11 liquidation plan (the "Plan"). Upon receipt by EB of the Settlement Payment, certain mutual releases of liability and other agreements set forth in the Settlement (as defined below) have become effective, and it is anticipated that EB's participation in the TSN Chapter 11 cases is concluded.
The Settlement Payment will result in a non-recurring positive effect of approximately EUR 0.8 million on Elektrobit Corporation's operating result and a positive effect on Elektrobit Corporation's cash flow of approximately EUR 0.8 million on the third quarter 2014. This payment supplements a USD 650,890 distribution received by EB under the Plan in March, 2012, on that portion of its claim entitled to payment priority under U.S. bankruptcy law.
Earlier, on August 12, 2014 U.S. time the United States Bankruptcy Court formally approved the motion seeking approval of a conditional agreement of settlement (the "Settlement") between EB and the Trust of the various disputes between EB and the bankruptcy estate of TSN and certain of its subsidiaries and affiliates.
The Settlement follows a settlement previously entered into between EB and TerreStar Corporation ("TSC") and certain of its preferred shareholders in TSC's Chapter 11 reorganization cases. Pursuant to that settlement, on August 28, 2012 TSC made a cash payment to Elektrobit Inc. of USD 13.5 million in full and final satisfaction of EB's claim against that entity and the parties exchanged mutual releases. That settlement did not include TSN and did not include any distribution from the TSN Chapter 11 cases.
EB had asserted claims for its accounts receivable in the amount of approximately USD 25.8 million (EUR 19.6 million as per exchange rate of August 28, 2014) in the Chapter 11 cases of its customers TSN and its parent company, TSC, filed in 2010 and 2011. In addition to the booked receivables, EB asserted claims for additional costs in the amount of approximately USD 2.1 million (EUR 1.6 million as per exchange rate of August 28, 2014) resulting mainly from the ramp down of the business operations between the parties. Thus, EB asserted claims against each of the TerreStar entities in amounts totaling USD 27.9 million (EUR 21.2 million as per exchange rate of August 28, 2014). 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.
The full implications of the TSN and TSC Chapter 11 cases on EB's profit, financial position and outlook can be finally determined only when EB has accounted for all costs related to collecting the receivables and the tax treatment of its receivables is confirmed. As more fully discussed in Elektrobit Corporation's interim reports and financial statement at www.elektrobit.com , EB has appealed a ruling by the U.S. Internal Revenue Service ("IRS") disallowing a deduction taken on EB's 2010 U.S. federal income tax return for the impairment of the receivables from the TerreStar companies. The appeal is presently pending before the IRS Office of Appeals.
Oulu, August 29, 2014
Elektrobit Corporation
Jukka Harju
CEO
Further information:
Jukka Harju
CEO
Tel. +358 40 344 5466
Distribution:
NASDAQ OMX Helsinki
Principal media
Elektrobit Corporation (EB)
EB creates advanced technology and turns it into enriching end-user experiences. EB is specialized in demanding embedded software and hardware solutions for wireless and automotive industries. The net sales in 2013 totaled EUR 199.3 million and operating profit was EUR 8.1 million. Elektrobit Corporation is listed on NASDAQ OMX Helsinki. www.elektrobit.com
