Sprint Nextel Corp. (S) is balking at TerreStar Networks Inc.'s attempt to get out of paying Sprint monetary damages Sprint says it was owed before TerreStar's bankruptcy filing.

In a filing last week, Sprint disagreed with TerreStar's objection to Sprint's claim that several TerreStar entities are liable to pay $104 million in Sprint claims. The claims stem from "band-clearing" costs that Sprint says it's owed.

In objecting to the claims late last month, TerreStar said Sprint is trying to "pick and choose" which TerreStar entity it pursues the claim against because it's scared it won't get paid.

"The reason for Sprint's new approach is clear: As an unsecured creditor of TSN, Sprint is behind close to $1 billion in secured debt obligations, and may not receive a large recovery on its claim, whereas at other debtor entities unsecured creditors might obtain a larger recovery," TerreStar said.

But Sprint said TerreStar had a chance before and just after its bankruptcy filing to oppose a Federal Communications Commission ruling that subjected TerreStar and others to pay the band-clearing costs but never did.

TerreStar also said that Sprint "prejudiced" it by not filing the claims before TerreStar and some of its subsidiaries entered bankruptcy. The company is trying to have a judge expunge the claims, or at least reduce them. Sprint says there's no basis for either of those things.

A hearing to decide on the dispute is scheduled for March 4.

Reston, Va.-based TerreStar, which is trying to build the first satellite smartphone, filed for Chapter 11 in Manhattan in October with a plan calling for secured noteholders like EchoStar Corp. (SATS) to swap more than $850 million in debt for nearly all the equity in a reorganized TerreStar. More junior creditors, however, will get just pennies on the dollar and existing equity holders are set to get nothing.

Last month, Judge Sean H. Lane of U.S. Bankruptcy Court in Manhattan sent TerreStar's proposal to creditors for a vote after a multi-day hearing with many objections by creditors and eventual concessions by TerreStar.

The company has said that alongside its bankruptcy plan, it's exploring a sale of the company that could fetch more value. Last month, The Wall Street Journal reported that MetroPCS Communcations Inc. (PCS) was one of the parties interested in those assets.

TerreStar Networks' parent company, TerreStar Corp., isn't in bankruptcy.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)

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