WashPost. Iridium's Financial Slide Continues
By John Schwartz
Washington Post Staff Writer
Thursday, July 15, 1999; Page E05
Shares of global satellite phone company Iridium World Communications
Ltd. took another dive yesterday, tumbling nearly 18 percent after the
president of the company's biggest outside investor said that Iridium's story
could end in liquidation.
Motorola Inc. President Christopher Growney said in a conference call
announcing his company's second-quarter earnings that Motorola sees
"three possible outcome scenarios" to troubled Iridium's long financial slide:
an out-of-court restructuring, in-court restructuring under Chapter 11 of
the bankruptcy code or "liquidation in bankruptcy."
But Growney said Motorola believes that Iridium can reach "an achievable
business plan based on the right financial restructuring solution." Motorola
owns approximately 18 percent of Iridium and developed much of its
technology; other big shareholders in the publicly traded company include
Lockheed Martin Corp., Raytheon Co. and Sprint Corp.
Growney said that in the meantime, Motorola does not intend to inject
more money into Iridium, which has its headquarters in the District, unless
other investors do.
Iridium, which launched a network of communications satellites that allows
customers to use a single pager or phone virtually anywhere in the world,
has stumbled badly in trying to attract customers to its pricey service.
The company had pledged to its creditors that it would have 27,000
customers by the end of March, but fell far short of that goal and is in the
process of trying to restructure its debts. Last month it announced its
creditors had granted an extension until Aug. 11 to meet the terms of an
$800 million credit line.
The company has also simplified its pricing structure and cut prices this
month, reducing the number of international calling zones for North
American users from 15 to as few as four, and reducing the price of its
handset and per-minute phone charges.
Credit Suisse First Boston has lowered its recommendation on Iridium to
"sell" from "hold."
Iridium spokeswoman Michelle Lyle said the company had no formal
response to the Motorola comments. "There's really little to say. It's
Motorola's prerogative to outline the possibilities" for Iridium, she said, but
"Iridium is only working on one scenario--trying to work with its creditors,
its investors, to restructure the capitalization of the company." Discussions
with all parties are moving forward, she said.
Shares of Iridium World, the publicly traded shares, ended the day at
$6.75, down $1.43 3/4, or 17.56 percent. Shares of Motorola, based in
Schaumburg, Ill., ended the day at $94.87 1/2, down $1.62 1/2.
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