The first in a group of companies to flip the switch on its satellite network -- which provides instantaneous communication through mobile phones to virtually any location in the world -- Iridium has had trouble attracting customers, and has failed to reach its revenue targets.
But the defaults, on loans worth $800 million and $750 million, do not necessarily spell bankruptcy for Iridium. The company is still negotiating with banks about a possible loan restructuring, with an announcement expected Monday, according to Merrill Lynch analyst Tom Watts.
"As long as they reach agreement by the end of the weekend, then I think the technical default is not meaningful," Watts said. "But we're clearly getting down to the wire."
Motorola, the guarantor of the $750 million loan and Iridium's largest backer, said it hopes the parties can reach an agreement on loan repayment.
"Regardless of today's expiration of the banks' extension, we will encourage all of the relevant parties to continue negotiations in an effort to agree on a plan to restructure Iridium's debt," Motorola spokesman Scott Wyman said. Motorola owns 18 percent of Iridium.
Analysts have speculated that the company is discussing a plan with creditors and bondholders to trade in their securities for debt that could be converted into Iridium stock.
Iridium will face another repayment deadline on August 15. The company had received a 30-day extension on $90 million of interest payments due on $1.45 billion in bonds.
In its eight year history as a corporation, Iridium has raised $5 billion to build, launch, and operate a global telecommunications network consisting of a constellation of 66 satellites.
When its service began nine months ago, prices were widely considered too high, and in the spring the company had subscribed only 10 percent of the customers it had projected.
Iridium will face competition from Globalstar, a Loral-backed company, when its service begins in September or October.
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