In a move designed to put the takeover of Iridium L.L.C.’s assets on the fast track, as well as appease disgruntled Iridium creditors, Craig McCaw and his team of investors have withdrawn the $74.6 million financing package submitted last week for the financially struggling satellite mobile phone provider.
McCaw’s new plan is to acquire Iridium assets through an auction process, provided for by rule 363 of the Bankruptcy Code, that could be completed by mid-April.
The interim financing package submitted Thursday provides Iridium with $5 million to fund operations through March 6, allowing McCaw time to complete the new acquisition plan. The investor team led by his Eagle River Investments L.L.C. will split the $5 million with Motorola Inc., Iridium’s largest single investor.
Before this round of financing expires, Iridium said it will file a new motion in early March outlining the new acquisition plan and additional debtor-in-possession financing to fund operations through the enactment of that plan.
“We are pleased by this new development,” said John Richardson, Iridium chief executive officer. “This approach should result in a more expeditious transition to a new operating company, which will benefit our customers.”
The original $74.6 million in DiP financing would have funded Iridium operations through June 15, during which time McCaw was going to determine how he would take over Iridium’s satellite system. While this new plan allows McCaw to begin buying assets earlier, the auction process allows for other bidders to participate and potentially increase the value gained from the assets for Iridium creditors.
A group of these creditors opposed to the original deal filed a motion earlier last week asking the court for permission to sue Motorola for $2 billion. Motorola had no comment on whether this new package satisfied the demands of those bondholders.
Motorola dedicated $20 million in operational financing for Iridium in December, which expired Feb. 15. According to an Iridium spokesman, Motorola will use the remainder of that promise to fill its portion of the $5 million DiP financing shared with Eagle River Investments.
Rumors that Iridium investor DDI Corp. of Japan is considering dissolving Nippon Iridium Corp.-the Japanese Iridium gateway provider of which it holds a majority share-surfaced last week as well. DDI owns 50.5 percent of Nippon Iridium, which itself holds an 11.2-percent equity stake in Iridium L.L.C.
However, Kyocera Corp.-which controls 10 percent of Nippon Iridium and is an Iridium phone manufacturer-reportedly said it has no plans to exit the business.
An Iridium spokesman confirmed the company has received reports that DDI may dissolve Nippon Iridium, but remains unsure of Kyocera’s intentions.
“We’ve seen conflicting reports form Kyocera,” he said. “We don’t know what to expect at this point.”
He added that other gateway providers may follow suit, given that McCaw’s reorganization plan calls for centralizing much of the power these gateway companies hold, in hopes of creating a more effective company.
“So we’re not shocked by it,” he said.
