McCaw and Chandra link up for ICO and possibly Iriduim.
Second article from Indian press mentions the bankruptcy court starts liquidation proceedings on December 15.
12/7/1999 Article:145319
McCaw ICO bailout approved; India's Chandra joins in
U.S. Bankruptcy Court in Wilmington, Del., has approved $500 million
in financing for ICO Global Communications assembled by cellular telephone
pioneer Craig McCaw, who has been joined by Indian television producer
Subhash Chandra in putting up the equity needed to bring the London-based
satellite communications out of Chapter 11 bankruptcy protection.
Chandra had entered a competing bid to rescue ICO (DAILY, Nov. 15),
but he and McCaw have since agreed to provide as much as 38% and 62%,
respectively, of the equity funding needed for a rescue, ICO reported. The
Bankruptcy Court last week approved an arrangement under which McCaw will
lead investors in pumping as much as $1.2 billion into ICO, which followed
"Big LEO" satellite communications startup Iridium into Chapter 11 last
summer when it was unable to cover its financing plan (DAILY, Aug. 30).
The court authorized McCaw and his affiliated companies Teledesic LLC
and Eagle River Investments LLC to provide another $75 million from an
initial round of $225 million, and a second round of financing worth $275
million. The court last month approved a $150 million tranche of the first
$225 million in bailout funds.
By the end of the second quarter of next year, McCaw and his bailout
partners are to provide as much as $700 million in additional funding to
bring ICO back to health, provided the court approves ICO's reorganization
plans. Existing ICO creditors and shareholders will be able to participate
in the refinancing, ICO said.
McCaw has also held talks with Iridium on financing to bring it out of
bankruptcy, with the idea of using existing and planned satellite assets of
the two bankrupt companies to generate an early revenue stream for
Teledesic, which plans a broadband low Earth orbit satellite constellation
(DAILY, Sept. 29).
India's Chandra is chairman of the Essel Group conglomerate, which
owns Zee Telefilms Ltd. Zee produces television programming that is
distributed across India and the rest of Asia, as well as portions of
Africa, Europe and the U.S. Chandra is also chairman of ASC Enterprises
Ltd., which is developing the Agrani regional geostationary satellite
system.
"These two entrepreneurs share a common vision of the benefits that
ICO can bring to the world," ICO Chief Executive Officer Richard Greco
stated in a company announcement of the bankruptcy court action. "Both
Craig McCaw and Subhash Chandra contribute tremendous strengths to the ICO
effort in their respective parts of the world."
Copyright 1999 The McGraw-Hill Companies, Inc.
economictimes.com
Chandra, McCaw may join hands to bail out
Iridium
Sourav Mukherjee
MUMBAI 5 DECEMBER
SATELLITE space is in the news. After agreeing to jointly revive
ICO Global Communications, Craig McCaw of the Teledesic
Group and Subhash Chandra of Zee Telefilms are believed to
have "reached an understanding" to work together on a possible
revival package for global satphone service provider Iridium LLC.
Sources said Mr McCaw and Mr Chandra have "discussed the
issue" at meetings on December 2 and 3, a day after Iridium held
its crucial board meeting with lenders in Washington. At the
Iridium board meet, lenders came to the conclusion that unless a
new investor comes in, there is no hope of saving the $3bn
bankrupt company with 66 satellites from going into liquidation.
The bankruptcy court starts liquidation proceedings on
December 15. The satphone provider has a subscriber base of
around 60,000.
Sources in New York confirmed that Mr McCaw has completed a
comprehensive "due diligence" on Iridium and that discussions
were on as to whether it was economically viable to pump in
huge equity funds in the over-$3bn venture.
"There has been no proposal yet. But if it comes, it will be before
December 15," said a source. "The two parties ? Mr McCaw and
Mr Chandra ? are working on the deal together like they did for
ICO. However, this one?s a tougher nut and involves guarantees
of infusing fresh funds to the tune of $500-700m in phases," the
source said. "The proposal, if cleared by Mr McCaw and Mr
Chandra, will be forwarded to the Iridium board for final approval.??
Earlier this year, Iridium LLC, the parent company of the Iridium
Network, filed under Chapter 11 for bankruptcy at a court in
Delaware in the US.
The filing was triggered by default on loan repayments following
which bankers to Iridium called back their loans.
Iridium has been funded by several gateways, gateway investors,
unsecured bondholders and secured creditors. While the banks
are not willing to take a hair-cut (partial waiver of principal or
interest), a new proposal will have to accommodate a hefty
hair-cut (sources say even 100 per cent) by unsecured
bondholders. Gateways and gateway investors will also have to
agree to an equity reduction.
Once this happens, a new Iridium has to be formed, contracts
redrawn and court approval sought. Indian lenders hold around
2.9 per cent of the equity of the parent at an investment of $70m
(Rs 300 crore), besides debt exposure estimated at around Rs
275 crore. If the company is liquidated Indian investors stand to
lose a staggering Rs 575 crore in one go.
"The process of revival might be difficult, but both Mr McCaw and
Mr Chandra realise the potential of Iridium vis-a-vis ICO. It is a
constellation of satellites that is complete with gateways, unlike
ICO which is half-cooked. The Iridium constellation and gateways
also understand that one cannot do without the other. The
takeover of Iridium will give the McCaw-Chandra combine a giant
push in their aim to own satellite space," the source said. "It is
an organisation which has a good chance of doing well by
launching new products.??
It is estimated that Iridium would need to generate around $1.5bn
to keep its lenders at bay. However, once a new investor comes
in with a bail-out package, present investors would be bound to
take a hefty hair-cut rather than lose the entire amount.
The lenders to Iridium LLC have retained a pair of high-profile
firms ? Weil, Gotshal & Manges, a law firm specialising in
bankruptcy restructuring, and Houlihan, Lokey, Howard & Zukin,
a Los Angeles-based investment bank specialising in
restructuring bankrupt firms ? to fight their case. Iridium LLC
has hired Donaldson Lufkin & Jenrette as its financial adviser for
the restructuring process.
Iridium has also been negotiating to convert a $700m loan into
equity even as its CEO John Richardson has asked shareholders
to be "prepared" for a more than 40 per cent cut in their stakes
as part of a restructuring plan.
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