The primary strategic alternatives included (i) the closing of a potential SkyTerra/Inmarsat combination, (ii) attracting a strategic partner to pursue an integrated satellite–terrestrial (“mobile satellite services–ancillary terrestrial component services” or “MSS–ATC”) opportunity in the North American market,
(iii) development of an MSS–only business plan anchored by a core satellite roaming partner, and/or (iv) a sale of SkyTerra.
In considering its alternatives, SkyTerra, consistent with its obligations under the MCSA, continued to support Harbinger’s activities in connection with the potential SkyTerra/Inmarsat combination.
In the next approximately nine months following the signing of the MCSA in July 2008, SkyTerra continued to support implementation of the MCSA while simultaneously pursuing strategic investments and business opportunities consistent with the commitments made in the MCSA and SkyTerra’s view that an acquisition of Inmarsat pursuant to the MCSA would be more beneficial to the interests of SkyTerra and its stockholders than the transactions contemplated by the Cooperation Agreement.
This had been discussed by Mr. Good on quarterly earnings calls with investors subsequent to the execution of the MCSA.
In the view of SkyTerra management and the board of directors, the process for regulatory approvals and financing for the possible offer for Inmarsat was extended, in part, as a result of the change in political administration in the United States as well as challenging and illiquid capital markets and the impact of the credit crisis.
In a March 4, 2009 letter, Harbinger and SkyTerra requested that the FCC process the applications proposing a transfer of control of SkyTerra LP’s FCC licensed subsidiary to Harbinger separately from the applications for transfer of control of Inmarsat.
The SkyTerra management and board of directors were made aware of the increasing uncertainty that the acquisition of Inmarsat could be financed and closed prior to the depletion of SkyTerra’s available funding.
In April 2009, the board of directors authorized the special committee to work with SkyTerra management, Morgan Stanley and Skadden to analyze funding and restructuring alternatives in light of the foregoing uncertainties.
On June 9, 2009, with Morgan Stanley’s encouragement, SkyTerra held a meeting of the board of directors to discuss the recent bankruptcy filing of DBSD North America (a mobile satellite services provider), which we refer to as “ICO,” and the implications of such bankruptcy filing for SkyTerra.
At the meeting, Morgan Stanley observed that the capital markets for new issue debt financings for spectrum–backed entities remained illiquid and unavailable to ICO. Morgan Stanley noted that strategic interest from third–parties for ICO’s assets was limited prior to the bankruptcy filing and that, as a result, the value of the equity interests in ICO was likely to be severely impaired in the bankruptcy proceeding based on indicative value ranges implied by the contemplated restructuring.
Morgan Stanley further noted that while SkyTerra did possess sufficient financial resources to fund its business operations through the third quarter of 2010, securing funding from financial and/or strategic investors in the current economic environment would prove challenging. Morgan Stanley noted that third parties identified by management as most likely to be interested in providing funding or proposing an acquisition of SkyTerra had chosen not to provide funding to or propose an acquisition of ICO to date, nor to commit the capital necessary to support a new 4G network deployment.
In Morgan Stanley’s judgment, the board would be warranted in exploring ways to restructure SkyTerra’s debt obligations and other liabilities, including payments to Boeing and other vendors, to extend SkyTerra’s ability to fund its business operations beyond the third quarter of 2010.
On July 24, 2009, SkyTerra selected a new launch window for its SkyTerra–1 satellite of August through October 2010 (as compared to the previous March through May 2010 window) based on a potential delay in delivery of SkyTerra–1 after receiving the most recent estimated delivery information from Boeing Satellite Systems (the manufacturer of the SkyTerra–1 satellite).
On July 30, 2009, Morgan Stanley met with the SkyTerra board of directors and provided the board of directors with a preliminary overview of SkyTerra’s strategic and financing alternatives."
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