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To: METMAN who wrote (4865)	5/23/1999 1:06:00 AM
From: Jon Koplik	Respond to of 29987

(Brief) Barrons follow-up piece on Iridium. May 24, 1999 Falling to Earth Iridium's debt dilemma Following a near disastrous start, the Iridium satellite phone system is flashing warning signals about its future. Traders say the company's bonds are going for about 20 cents on the dollar, making them wonder why the stock of Iridium Worldwide Communications, the public investment vehicle, has any value even after having dropped 75% just since year-end, to around 10. Just a year ago, the stock had more than tripled to 72, less than 12 months after the initial public offering that rode the wave of tremendous ballyhoo about its phone satellite system, the first to enable a subscriber to dial anywhere in the world from virtually any location. Heavy selling recently followed Iridium's announcement that it wouldn't meet a target of 52,000 customers required by an $800 million bank loan by the end of May, even after lenders had extended the deadline by two months. In January, Iridium had projected 600,000 users by the end of 1999, but as of the end of March, the total was at just above 10,000, consistent with our skeptical view of the venture ("Crowded Skies," June 15, 1998). The shortfall in subscribers for the costly service has been accompanied by early technical glitches and management upheaval. John Coates, an analyst at Salomon Smith Barney, frets about the company's debt load but adds "bankruptcy is not a likely scenario at this point." He feels the company needs a financial reprieve to give it time to gain subscribers. The company is in negotiations with lenders and major investors, presumably for some form of debt restructuring and a further infusion of cash. A decision could come at any moment. The key appears to be Motorola, which created the system and enlisted phone systems around the world to help in financing the $5 billion satellite network. Motorola has guaranteed big chunks of the debt and deferred heavy payments from Iridium to cover operating and maintenance expense. It owns more than 16% of Iridium LLC, the operating company (Iridium Worldwide's main asset is 16% ownership of Iridium LLC). One analyst, desiring anonymity, believes Motorola holds the big cards, but may not be ready yet to show its hand. Keeping Iridium out of bankruptcy, which might require selling its assets at a sharp discount from asset value, would appear to be desirable for Motorola because of its close links to Iridium. But the depressed value of Iridium's debt implies the market has its doubts. -- Harlan S. Byrne Copyright © 1999 Dow Jones & Company, Inc. All Rights Reserved.