Iridium Files for Bankruptcy Protection


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	Iridium Files for Bankruptcy Protection posted: 03:59 pm ET 13 August 1999

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Iridium LLC announced Friday that it has filed for bankruptcy in the United States Bankruptcy Court in Delaware.

The move came after some of Iridium's major investors filed an involuntary Chapter 11 petition against the troubled satellite company. The group, called The Steering Committee of the Informal Committee of the Holders of the Senior Notes of Iridium, holds about 25% of Iridium's $1.45 billion in outstanding senior notes.

"Despite the best efforts of the parties involved, consensual agreement could not be reached on a restructuring plan," said Talton Embry of Magten Asset Management Corp., a member of the Steering Committee, in a statement released Friday afternoon. "It became clear to the various parties at interest that a Chapter 11 filing was inevitable and, unless drastic action was taken, the company's assets could be at serious risk."

In a separate statement, Motorola, which owns 18% of Iridium, said it will continue to provide full operational support for Iridium. Motorola is providing significant technical, sales and marketing support for Iridium through its sales force and as a gateway owner.

However, Motorola said its willingness to provide additional financial support to Iridium "continues to depend on a substantial degree of participation in a financial restructuring by all other relevant parties with a significant financial interest."

In a statement released Friday afternoon, Iridium said it will continue to provide service to its customers despite the bankruptcy filing. Iridium currently operates a network of 66 low earth orbiting satellites and terrestrial cellular systems that allows customers to communicate by satellite phone from anywhere on the planet.

The Nasdaq Stock Market halted trading in Iridium stock at 2:04 p.m. ET. The last sale price of the company's shares was 3 1/16, down 28% from its close of 4 1/4 on Thursday.

On Wednesday, Iridium announced that it had defaulted on two loans worth more than $1.5 billion. Before that, Iridium had already received three extensions from its lenders, led by Chase Manhattan.

A spokesman for Iridium competitor Globalstar, Mac Jeffery, said that Iridium's Chapter 11 filing does not mean that the market is not ready for satellite phones. Globalstar plans to unveil its service at the end of September.

"We think Iridium could very well have succeeded," he said. "There's nothing wrong with the concept, but with their execution."

But Jeffery tried to distance his company from Iridium's announcement, saying the two companies have very different business plans.

"All other things equal, our system costs less and has three times the capacity," he said. Jeffery also said Globalstar's finances are more secure than Iridium's.