In a recent decision1 involving TerreStar Networks, Inc., and its affiliates (“TerreStar” or the “Debtors”), the United States Bankruptcy Court for the Southern District of New York held that the Debtors’ noteholders held a valid lien on the economic value of a license granted to TerreStar by the Federal Communications Commission (“FCC”) and that nothing in Article 9 of the New York Uniform Commercial Code (the “NYUCC”) or Section 552 of the Bankruptcy Code invalidated that lien. The question of whether a secured lender can obtain a valid lien on an FCC license has been subject to contested debates and contradictory decisions of late, with some courts holding that FCC licenses cannot be encumbered, while other courts, in differentiating between the economic and noneconomic attributes of an FCC license, have held that lenders may encumber such economic attributes of the license without violating public policy. The TerreStar court, relying heavily on a decision issued by Judge Peck in 2009 in the case of Ion Media Networks, sided with the lenders who claimed to have perfected their liens in TerreStar’s economic interest in the FCC license when they extended TerreStar approximately $500 million in loans in 2008.
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