NYTimes. Two Weeks Later, ICO Follows Iridium Into Bankruptcy Court
August 28, 1999
By ANDREW POLLACK
OS ANGELES -- In the second bankruptcy filing this month for
a satellite communications company, ICO Global
Communications (Holdings) Ltd. filed for protection from its creditors
Friday, after having failed to raise money from skittish investors.
The Chapter 11 filing in Wilmington, Del., came two weeks after the
bankruptcy filing of Iridium LLC, which barely attracted any customers
for its service using satellites to provide mobile telephone service
anywhere in the world. Iridium's failure made investors reluctant to pour
more money into ICO, which plans a similar service using its $4.7-billion
system beginning in the third quarter next year.
ICO chief executive Richard Greco said Friday that the company
planned to continue with its business. "Our Chapter 11 filing should
provide ICO with the extra time needed to reorganize, recapitalize and
complete our financing," he said in a statement issued from the company's
headquarters in London.
"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," said Greco.
Armand Musey, an analyst at Banc of America Securities, said the
bankruptcy filing reflected a desire by ICO's investors to "buy some time"
to see how a third competitor, Globalstar Telecommunications Ltd.,
fares.
Globalstar, which is backed by Loral Space & Communications, plans to
begin service in late September. "They really want to see Globalstar
validated before they put more money into ICO," Musey said.
A failure by ICO could cause Hughes Electronics Corp., which is
building ICO's 12 satellites, to take a charge against earnings of $500
million, according to regulatory filings by Hughes. Richard Dore, a
spokesman, said Friday that it was too early to tell how the bankruptcy
filing would affect Hughes, a subsidiary of General Motors Corp. Hughes
owns 2.6 percent of ICO as part of an agreement to eventually buy 4
percent of the company's stock for $93.8 million.
Shares of Hughes, however, rose $1.1875 Friday, to $52.625,
apparently because investors think the company, which had been
participating in attempts to rescue ICO, will now not put any more
money into the company. Globalstar also rose $1.1875, to $28.875,
because the possible failure of ICO leaves it with one less competitor.
Shares of ICO, which brought $12 at the company's initial public offering
last summer, fell 62.5 cents Friday, to $3.625, before trading was halted.
ICO was created by Inmarsat, an international organization recently
turned into a corporation, which provides satellite communications to
ships. Many of the investors in ICO are Inmarsat's members, telephone
companies worldwide.
TRW is also a large investor, with 13.9 million shares, or 6.7 percent,
according to an ICO prospectus. A TRW spokesman said it was too
soon for the company to comment.
Although ICO had already asked for a delay in paying more than $40
million in interest due at the beginning of August, the bankruptcy filing
surprised creditors. "They didn't telegraph this at all," said Luc Despins, a
lawyer in New York who represents an informal committee of ICO
bondholders. "We don't know why the company filed so soon and so
suddenly."
Despins, who works for Milbank Tweed Hadley & McCloy, said the
bondholders had not been threatening to push ICO into bankruptcy so
there was no need for ICO to seek protection as a pre-emptive move.
ICO has already raised $3 billion of the $4.7 billion it estimates it needs
to begin service. But with Iridium's problems clouding the market, ICO
recently failed to raise $500 million from a public rights offering despite
extending the deadline twice. It then announced a tentative agreement to
secure $600 million from strategic investors, which reportedly included
Hughes, but that plan also fell apart.
More recently, industry executives said, ICO was trying to raise a smaller
amount, said to be $400 million. But that plan, which was to be voted on
at an investor meeting in Paris on Saturday, has apparently fallen through
as well.
The ICO bankruptcy is the latest blow to the satellite industry, which has
also suffered from rocket and satellite failures, national security
controversies and tighter export controls. But some segments of the
market, particularly direct television broadcasting to home by Hughes'
DirecTV and Echostar Communications, continues to do well.
Copyright 1999 The New York Times Company |
