Chase alleges triggering event/event of default under loan and demands MOT guarantee $300 m of I* debt:
Wednesday August 4, 5:49 am Eastern Time
Chase tells Motorola to guarantee part of loan
NEW YORK, Aug 4 (Reuters) - Chase Manhattan (NYSE:CMB - news) has told Motorola (NYSE:MOT - news) that it has to guarantee $300 million of an existing $800 million loan for Iridium (Nasdaq:IRID - news), a satellite telecommunications company that is working to reorganise its debt and struggling to add subscribers.
Wireless phone and chip maker Motorola has said it held talks with Iridium in the last two weeks and was optimistic the satellite network company could restructure and survive.
But in a filing with the Securities and Exchange Commission, Iridium said it has received a copy of a letter, dated July 29, to Motorola from Chase Manhattan, saying that ''an event of default has occurred'' under the credit agreement between Iridium and its Chase Manhattan-led lenders.
The letter says that Iridium is ''required to demand that Motorola provide a guarantee of $300 million of Iridium's borrowings under the secured credit agreement and that Iridium has failed to make such a demand on a timely basis.''
If an event of default occurred, the letter said Iridium would also be in default under its $750 million credit agreement guaranteed by Motorola, according to Iridium.
''And, if the lenders under the secured credit agreement or the guaranteed credit agreement accelerated the loans thereunder as a result of an event of default, Iridium also would be in default under its approximately $1.45 billion of Senior Notes,'' the letter said.
Iridium said in the filing, however, that both Iridium and Motorola believe that no ''triggering'' event under the credit agreement has occurred and, accordingly, an event of default under the agreement for failure to demand a guarantee has not occurred.
''Iridium believes that the Chase letter will not have a significant effect on the continuing restructuring negotiations among Motorola, Iridium, Iridium's bank lenders, its bond holders and its equity holders,'' the company said in the filing.
Company officials were not immediately available for comment.-
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