Stock exchange release
Free for publication on August 13, 2014 at 9.15 a.m. (CEST+1)
The court approved the conditional settlement between Elektrobit Corporation's
subsidiary, Elektrobit Inc. and the Terrestar Networks Inc. Liquidating Trust
On August 12, 2014 U.S. time the United States Bankruptcy Court (the "Court")
formally approved the a conditional agreement of settlement (the "Settlement")
between Elektrobit Inc. ("EB"), a subsidiary of Elektrobit Corporation, and The
Liquidating Trust (the "Trust") of TerreStar Networks Inc. ("TSN"). Based upon
the Court's approval, if the Settlement becomes effective by its terms, the
Trust shall be obligated to pay to Elektrobit Inc., an immediate cash payment of
USD 1,075,000 (EUR 0.8 million as per exchange rate of August 12, 2014) (the
"Settlement Payment") in full and final satisfaction of its claims against TSN
and in resolution of all disputes between EB and the bankruptcy estate of TSN
and certain of its subsidiaries and affiliates in the TSN liquidation cases.
If the Settlement becomes effective by its terms, the Settlement Payment would
be paid within ten days after the Settlement becomes effective, i.e. during the
third year quarter of 2014. The Settlement Payment would result in a non-
recurring positive effect of approximately EUR 0.8 million as 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. Upon
receipt by EB of the Settlement Payment, certain mutual releases of liability
and other agreements set forth in the now approved Settlement will become
effective.
The Settlement will not become effective until the Court's order becomes final
and unappealable. At this time there is no assurance that this contingency will
be fulfilled.
EB had asserted claims for its accounts receivable in the amount of
approximately USD 25.8 million (EUR 19.3 million as per exchange rate of August
12, 2014) in the Chapter 11 cases of its customers TSN and its parent company,
TerreStar Corporation ("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
12, 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 20.9 million as per exchange rate of
August 12, 2014). Due to uncertainties related to the accounts receivable,
Elektrobit Corporation booked an impairment of the accounts receivable in the
amount of EUR 8.3 million during the second half of 2010.
The Settlement follows a settlement previously entered into between EB and 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 EB 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.
On October 24, 2012, the Court entered an order approving a plan of
reorganization for TSC and a subsidiary of TSC (but not including TSN) that
preserved EB's rights with respect to EB's claim against TSN.
According to the terms of the Settlement, EB's remaining claims against TSN are
fixed and allowed as a general unsecured nonpriority claim in the amount of USD
19,551,147.65 (EUR 14.6 million as per exchange rate of August 12, 2014) (the
"Allowed Nonpriority Claim") and the Trust will pay to EB in full and final
satisfaction of the Allowed Nonpriority Claim a distribution equal to 5.4984% of
the Allowed Nonpriority Claim, which the parties agree equals the amount of the
USD 1,075,000 Settlement Payment. This amount supplements a USD 650,890
distribution received by EB in March, 2012, under the plan of liquidation for
TSN, on that portion of EB's claim entitled to payment priority under U.S.
bankruptcy law. The Settlement also provides for an exchange of comprehensive
mutual releases. The releases resolve, e.g., an informal objection by the
Trustee to certain amounts claimed by EB and an informal demand by the Trustee
for return by EB of certain payments received by EB within 90 days prior to
TSN's bankruptcy filing.
The full implications of the TSN and TSC Chapter 11 cases on Elektrobit
Corporation'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 13, 2014
Elektrobit Corporation
Jukka Harju
CEO
Further information:
Jukka Harju
CEO
Tel. +358 40 344 5466
Päivi Timonen
Chief Legal Officer
Tel. +358 40 344 2794
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
[HUG#1848442]
The court approved the conditional settlement between Elektrobit Corporation's subsidiary, Elektrobit Inc. and the Terrestar Networks Inc. Liquidating Trust
| Source: Bittium Oyj