STOCK EXCHANGE RELEASE
Free for publication on August 25, 2012, at 0.15 a.m. (CEST+1)
THE COURT APPROVED THE CONDITIONAL SETTLEMENT BETWEEN EB'S, ELEKTROBIT CORPORATION, SUBSIDIARY, ELEKTROBIT INC. AND TERRESTAR CORPORATION AND CERTAIN OF ITS PREFERRED SHAREHOLDERS IN THE REORGANIZATION CASE OF TERRESTAR CORPORATION
On August 24, 2012 U.S. time the United States Bankruptcy Court formally approved TerreStar Corporation's motion for conditional settlement ("Settlement") with Elektrobit Inc., a subsidiary of EB, Elektrobit Corporation ("EB"), and TerreStar Corporation and certain of its preferred shareholders, of the various disputes between them in TerreStar Corporation Chapter 11 reorganization cases. Further, the Bankruptcy Court approved the motion for new financing to enable TerreStar Corporation to satisfy its obligations under the approved Settlement. Based upon the Court approval, TerreStar Corporation is obligated to pay to Elektrobit Inc., within two business days, an immediate cash payment of USD 13.5 million (EUR 10.8 million as per exchange rate of August 23, 2012) (the "Settlement Payment") in full and final satisfaction of its claim against TerreStar Corporation and in resolution of all disputes between EB and the other parties in the TerreStar Corporation reorganization cases. Upon receipt by Elektrobit Inc. of the Settlement Payment, certain mutual releases of liability and other agreements set forth in the now approved Settlement will become effective. EB understands that TerreStar Corporation does not presently have funds available to make the Settlement Payment, but intends to use funds that it expects to receive from the now-approved financing to satisfy its obligations under that Settlement. The Settlement does not include the TerreStar Networks Chapter 11 cases, which remain pending, and does not include any distribution therefrom that may be available for EB.
The implications of the TerreStar Corporation and TerreStar Networks Chapter 11 cases on EB's profit, financial position and outlook can be finally determined only when the outcome of both Chapter 11 cases is known, including all costs related to collecting the receivables, and e.g. confirmed tax treatment. If received by Elektrobit Inc., the Settlement Payment in the TerreStar Corporation Chapter 11 cases alone, and without any further distribution from the TerreStar Networks Chapter 11 cases, would result a positive effect of approximately USD 1.6 million (EUR 1.3 million as per exchange rate of August 23, 2012) on EB's operating result and a positive effect on EB's cash flow of approximately USD 13 million (EUR 10.4 million as per exchange rate of August 23, 2012). If TerreStar Corporation receives the approved new financing, the Settlement Payment would be paid within two business days after the Settlement, i.e. during the third year quarter of 2012.
EB expects that the Settlement Payment will not be made unless and until the approved funding is actually received by TerreStar Corporation. In the event that the funding is not received by TerreStar Corporation, nothing contained in the Settlement shall be deemed to be a waiver of any claims or an admission of liability by any party thereto and, in such event, all rights and remedies of the parties shall be preserved.
The now approved Settlement does not include the TerreStar Networks Chapter 11 cases or any distribution therefrom that may be available for EB. Information on the TerreStar Networks reorganization case and estimated distribution as well as uncertainties regarding the amount of the receivables and collecting the receivables are presented in the Company's Interim Report, published on August 7, 2012, under "Risks and Uncertainties" section.
On October 19, 2010, TerreStar Networks and certain other affiliates of TerreStar Corporation and on February 16, 2011, the parent company TerreStar Corporation filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code to strengthen their financial position. EB has asserted claims against each of the TerreStar entities in amounts totaling USD 27.9 million (EUR 22.3 million as per exchange rate of August 23, 2012). 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.
Information on TerreStar Networks' and TerreStar Corporation's reorganizations are presented in the October 20 and 25, November 20 and December 30, 2010, February 17, and November 18, 2011, June 21, and August 3, 2012 stock exchange releases as well as in EB's interim reports and financial statement at www.elektrobit.com.
Oulu, August 25, 2012
EB, Elektrobit Corporation
Jukka Harju
CEO
Further information:
Jukka Harju
CEO
Tel. + 358 40 344 5466
Päivi Timonen
CLO
Tel. +358 40 344 2794
Distribution:
NASDAQ OMX Helsinki
Principal media
EB, Elektrobit Corporation
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 for the year 2011 totaled MEUR 162.2. Elektrobit Corporation is listed on NASDAQ OMX Helsinki. www.elektrobit.com
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: Elektrobit Oyj via Thomson Reuters ONE
