PLDT seeks to recover $27.5 million from ProtoStar

MANILA, Philippines - Philippine Long Distance Telephone Co. (PLDT) will seek the recovery of $27.5 million from bankrupt Bermuda company ProtoStar Ltd. which was used as advance payment for the use of the latter’s C-band transponders on the ProtoStar I satellite.

This developed after PLDT learned that ProtoStar and its affiliates ProtoStar Satellite Systems Inc., ProtoStar I Ltd., ProtoStar II Ltd., ProtoStar Development Ltd. and ProtoStar Asia Pte Ltd. each filed voluntary petitions for relief under Chapter 11 of the US Bankruptcy Code. The cases are pending before the US Bankruptcy Court in the District of Delaware.

In its voluntary petition, ProtoStar disclosed that PLDT is its largest unsecured creditor for $27.5 million. ProtoStar also said it estimates it will have funds available for distribution to unsecured creditors.

On Sept. 16, 2008, PLDT and ProtoStar Ltd., which is engaged in the satellite business, signed an agreement for an option to subscribe to $27.5 million worth of ProtoStar Series C preferred shares and an agreement for space segment services under which PLDT would make prepayment of the same amount for the use of the company’s C-band transponders.

Under the agreement, when the prepayment is made, ProtoStar is obligated to provide service on five C-band transponders on its ProtoStar I satellite from 2011 to 2017.

Subsequently, on May 15, 2009, PLDT notified ProtoStar that it is not exercising its option to subscribe to the $27.5 million preferred shares and that the agreement for space segment services between the two companies remains effective.

ProtoStar, however, already received the $27.5 million as priority deposit under the agreement for space segment services to secure for PLDT first priority for the use of the C-band transponders.

PLDT said it will engage counsel to represent it in the bankruptcy process and will actively participate in the proceedings to protect its rights and interests as a creditor of ProtoStar.