ProtoStar Ltd. (“ProtoStar”), a satellite operator that provides television and internet access throughout Asia, filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware on June 29, 2009.  As reflected in ProtoStar’s Declaration in Support of First Day Bankruptcy Motions, the company’s satellites provide “direct-to-home” satellite television and internet connectivity to billions of users throughout India, Indonesia, Taiwan, the Philippines and Southeast Asia.  Starting in 2008, ProtoStar launched two satellites into orbit  – the PS I and PS II Satellites.

Events Leading to Bankruptcy

The ProtoStar I satellite originally provided satellite services to Agrani Satellite Services Limited (“Agrani”).  According to ProtoStar’s Declaration, on April 1, 2009, Agrani sent a notice to ProtoStar claiming to terminate the parties’ Satellite Capacity Agreement originally entered by the parties in November of 2007.  Two days later, ProtoStar received a termination notice from the Intersputnik International Organization of Space Communications (“Intersputnik”),  the organization that provided ProtoStar with its orbital rights pursuant to a sponsorship from the Republic of Belarus.  Like the Agrani termination notice, ProtoStar challenges the validity of the Intersputnik termination notice.

On April 17, 2009, two weeks after receiving the termination notice from Intersputnik, ProtoStar received a notice of default from the agent for one of its prepetition lenders.  During this same time period, the company failed to make interest payments due on its secured notes.

Debtors’ Financials

ProtoStar’s revenues for 2008 totaled $3.1 million.  According to its petition for bankruptcy, the company’s ten largest trade creditors include:

  1. Philippine Telephone Co. … $27.5 million
  2. Agrani Satellite Services Ltd. … $8.1 million
  3. ILS International Launch Services … $5.7 million
  4. Boeing Satellite Systems … $5.5 million
  5. PT Media Citra Indostar … $5.0 million
  6. Arianespace … $4.0 million
  7. Space Systems/Loral … $3.6 million
  8. Integral Systems … $2.4 million
  9. SingTel … $1.0 million
  10. Aon Risk Services … $348,287

(Read ProtoStar’s List of 20 Largest Unsecured Claims here).

ProtoStar and the Bank of New York Mellon entered into a prepetition loan facility in March 2007 with a principal balance of $10 million.  According to the Declaration, the company issued $160 million in senior secured convertible notes that are due in 2012.  Finally, in March 2008 ProtoStar entered into a loan agreement with Credit Suisse. As of the date the company filed for bankruptcy, the Credit Suisse loan had a principal amount outstanding of $240 million.

First Steps in Bankruptcy

The company filed several “first day” motions seeking relief from the Delaware Bankruptcy Court so that it may transition into a debtor in possession.  Among these motions, ProtoStar seeks an order appointing a claims agent and an order approving an “Essential Vendors Motion.”  Under the Vendor Motion, ProtoStar seeks to pay certain prepetition claims of vendors the company believes provides “essential goods and services.”  In addition to these motions, ProtoStar seeks approval of debtor in possession financing totaling $16 million.

This bankruptcy proceeding is before the Honorable Mary F. Walrath, former Chief Judge of the United States Bankruptcy Court for the District of Delaware.