A U.S. bankruptcy court has given ICO Global Communications final approval for $500 million in financing from an investor group led by Craig McCaw and Indian media magnate Subhash Chandra, who had challenged McCaw with a competing financing bid.
Under the agreement, McCaw will provide 62 percent and Chandra 38 percent of the $1.2 billion ICO needs to exit bankruptcy protection. At the end of October, ICO and McCaw agreed to split the total figure into three tranches-$225 million for the first round of debtor-in-possession financing, $275 million for the second round and the remaining $700 million for exit financing.
On Nov. 9, the bankruptcy court approved the initial $150 million of that first tranche from McCaw. The Dec. 3 court decision approved the balance of that first tranche and the complete second tranche, totaling $500 million, which McCaw and Chandra will split. The two men also will share the final $700 million stake.
ICO expects to complete the first and second financing rounds by the end of January. No court date has been scheduled for the final financing round.
Once the financing is completed, McCaw will own about 46 percent of ICO, Chandra 28 percent, and ICO creditors and shareholders the remaining 26 percent.
Many expect a similar financing arrangement between McCaw and Iridium L.L.C. While neither party is commenting, several news organizations and analysts have speculated that McCaw will offer Iridium a similar financing package. It remains to be seen if Chandra will join in that scenario.
Meanwhile, the ICO financing paves the way for the operator to exit bankruptcy protection by mid-2000, the company said.
“We’d like to emphasize how pleased we are at the outcome,” said Joe Tedino, ICO spokesman. “They both are visionaries and recognize incredible value when they see it.”
The company, which has set its first satellite launch for January, expects to begin commercial service in the second quarter of 2001. Tedino said each rocket launch will carry only one satellite. No launch dates have been set beyond the one in January, but Tedino said the company will need to continue launches at a high rate to meet its commercial service date.
Renewed interest in MSS
The interest of McCaw and Chandra in ICO points to the renewed excitement about satellite-based global mobile voice services provision, following a recent dark period when most MSS news was negative.
Once hyped as the wireless industry’s next great step, the mobile satellite system voice market fell from grace when pioneer Iridium declared bankruptcy in August, less than a year after launching commercial service in November 1998. It couldn’t attract the number of subscribers needed to pay for operations.
ICO filed for bankruptcy protection about a week later.
Analysts speculate McCaw and Chandra are interested in the bundling opportunities ICO services may provide. In addition, McCaw previously expressed interest in what he termed the early market-entry opportunities provided by the Iridium and ICO bankruptcies.
McCaw’s Teledesic “Internet in the Sky” venture is a satellite-based global broadband network, backed by Microsoft Corp.’s Bill Gates and Motorola Inc. However, it is not expected to begin service until 2004.
Controlling the narrowband voice networks of ICO and/or Iridium would get McCaw’s name associated with satellite services much more quickly, as well as allow him to bundle various satellite services on one bill.
Chandra runs Zee Telefilms Ltd., perhaps Asia’s largest TV conglomerate, and aims to extend his media empire globally. His original bid for ICO offered financing in return for a 74-percent stake.
Rather than engage in a bidding war, though, McCaw and Chandra joined forces.
Chandra doesn’t shy away from big deals. In September, he bought out his partner in the TV and cable business for $297 million in what was the largest media acquisition in Indian history. Today Chandra controls the largest privately owned TV, cable and content provider in the region.
In the satellite realm, his ASC Enterprises spinoff aims to spend $775 million to use the Agriani satellite to create an Asia/Middle East mobile phone regional network.
