Bloomberg. ICO Global, Satellite-Telephone Company, Files for Bankruptcy Protection
Technology News
Sat, 28 Aug 1999, 1:43am EDT
By Josh Fineman
ICO Global Seeks Chapter 11 Bankruptcy Protection (Update3)
(Adds bankruptcy filing details in 2nd paragraph, analyst
quote in 4th paragraph.)
Wilmington, Delaware, Aug. 27 (Bloomberg) -- ICO Global
Communications Ltd., which is trying to build the world's third
global satellite-telephone network, filed for bankruptcy
protection from creditors after struggling to raise funding.
In its Chapter 11 petition filed today in U.S. Bankruptcy
Court in Wilmington, Delaware, ICO listed assets of $2.5 billion
and debt of $1.1 billion. The filing comes after ICO asked
bondholders last week for a delay until Sept. 30 in paying
$43 million in interest, according to a regulatory filing.
ICO's Chapter 11 filing follows Iridium LLC's by two weeks.
Iridium, the first to offer satellite-telephone calling, stumbled
in marketing the service, and its troubles may have played a role
in ICO's failure to win backers for its $4.6 billion system,
analysts and investors said.
``Iridium ripped the curtain off the satellite-telephone
industry and people don't like what they've seen,' said Phelps
Hoyt, an analyst with KDP Investment Advisors who follows the
industry.
ICO's 15 percent bonds due in 2005 fell 25 points, or $250
per $1,000 face value, to 15 cents on the dollar, traders said --
a 63 percent decline. They've tumbled 85 percent since the
company issued debt in July 1998 totaling $460 million.
ICO Global shares, which have lost 67 percent of their value
this year, fell 5/8 to 3 5/8 at midday before trading was halted.
Financing
This month, London-based ICO failed to get $600 million in
financing from an unidentified investor group. It later said it
would consider another proposal from the group for a smaller
investment. Shareholders are expected to vote on that proposal
tomorrow in Paris. Whether that vote was expected to move forward
wasn't known.
ICO also failed to attract subscribers to a rights offering
set for earlier this year. That offering, which was extended
twice, intended to raise $500 million.
ICO has said it needs to raise about $1.6 billion, including
the money raised from the strategic investors, to pay for
operations before starting service in the fourth quarter of 2000.
``Our Chapter 11 filing should provide ICO with the extra
time needed to reorganize, recapitalize, and complete our
financing,' ICO Chief Executive Richard Greco said in a
statement. ``We believe that our actions will be successful, and
that ICO will emerge as a very effective competitor in providing
global mobile satellite telephone services.'
Iridium expected to have as many as 600,000 customers by the
end of this year. It has only about 20,000, according to
analysts' estimates. ICO also will be competing with Globalstar
Telecommunications Ltd. in the satellite-communications industry.
Obligations
``If Iridium hadn't launched its system, no would have known
that the market for satellite-phone service wasn't developing as
quickly as hoped,' KDP's Hoyt said. ``There'd be more money
available to keep things moving forward.'
Three ICO units also filed for Chapter 11 in addition to the
parent company. ICO's operations division listed assets of
$2.3 billion and debt of $2.3 billion, while its Dutch unit, ICO
Global Communications Holdings BV, listed assets of
$706.9 million and debt of $694.3 million debts. A third unit,
ICO Global Communications Services listed $40.8 million in assets
and $18.3 million in debt.
Among the largest creditors of the company and its units are
Tokyo-based NEC Corp., which is owed $78.9 million, Entel Chile
SA, owed S2.04 million and Hughes Space & Communications
International Inc., a unit of General Motors Corp.'s Hughes
Electronics subsidiary, which is owed $99 million.
Hughes Electronics, based in El Segundo, California, has a
4 percent stake in ICO and is building ICO's 12 satellites.
Hughes has about $500 million in exposure to ICO, according to a
U.S. Securities and Exchange Commission filing.
Hughes Electronics
``We need to get some more info before we can really make an
assessment as to what it means to us,' Hughes spokesman Richard
Dore said.
Investors are likely to view ICO's filing as positive
because it removes a cloud that has been hanging over Hughes
stock in recent weeks, CE Unterberg analyst William Kidd wrote in
a report. Kidd said that Hughes exposure to Iridium [ICO!?] equals about
$1.34 a share, which he believes has been ``more' than priced
into the stock.
``Hughes will now be able to put this issue to rest, which
we believe is a positive for GMH shares' Kidd wrote.
Shares of El Segundo, California-based Hughes rose 1 3/16 to
52 5/8.
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