"Iridium Close To Reaching Pact With Debt Holders" (Source: DJ)
August 9, 1999
Iridium Close To Reaching Pact With Debt Holders
By PALLAVI GOGOI
NEW YORK -- Iridium LLC is close to reaching a restructuring agreement with debt holders, according to people familiar with the negotiations.
The restructuring package involves offering 44% of the company's equity to holders of $1.45 billion of Iridium's debt.
It would also involve a further $400 million cash infusion from the Washington, D.C.-based satellite phone company's chief backer, Motorola Inc., along with a few other strategic investors. The cash injection would raise Motorola's stake in Iridium to 25% from 18%.
If debt negotiations aren't successful, observers fear that Iridium could be pushed to bankruptcy as soon as Wednesday. Iridium has until Aug. 11 to meet what have now become difficult targets of subscribers and revenue set by banks holding loans totaling of $800 million.
Though the company has so far indicated that bankruptcy is not a viable option, some analysts see that as the best route for the company.
'My opinion is that Chapter 11 should have been more viable,' said Eric Tutterow, high-yield telecommunications analyst at Bank of New York.
'They will have more time to restructure their debt and can focus on their business. Every month that ticks by is a month of foregone revenue,' he added.
Besides, Iridium faces another Aug. 15 final deadline to pay $90 million in loan interest to bondholders.
Two-thirds Approval Needed
The proposed restructuring package is said to have been proposed by Schaumburg, Ill-based electronics company Motorola.
One analyst said that it was more likely that bond holders would agree to this package. 'Earlier, Iridium was offering only 25% equity and this seems like a pretty nice chunk,' one observer noted.
Motorola wouldn't confirm or deny the rumors. 'The negotiations are continuing and we are not commenting on the day-to-day progress,' said Scott Wyman, a Motorola spokesman.
Any restructuring package will have to be approved by at least two-thirds of debt holders, analysts said.
A Los Angeles-based investment bank, Houlihan Lokey Howard & Zukin is representing bond holders in the negotiating process with Iridium.
Houlihan Lokey has indicated that it does have the required two-thirds majority, sources said. However, some doubt that the consent of so many debt holders can be reached immediately.
Houlihan Lokey didn't return phone calls seeking comment.
Observers say that Iridium has yet another route that it could pursue.
'Iridium can petition a federal judge to put a stay in place for about three months if the process gets out of hand,' said a person familiar with the negotiation process.
'If Iridium can convince the judge that they're far along in the negotiating process, he will grant it,' he added.
Iridium didn't immediately return phone calls.
Monday, Iridium's stock price was up 1/4 to 6 3/8 early afternoon. Its bonds were quoted at 24 bid and 26 offered, up 2 points from Friday.
-By Pallavi Gogoi; 201-938-2122; pallavi.gogoi@dowjones.com
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