Chase Manhattan Corp., a chief lender to cash-starved satellite phone company Iridium LLC, is claiming that Iridium has defaulted on an $800 million loan. As a result, Chase is demanding that Motorola Inc., Iridium's biggest backer, pony up $300 million to ensure the eventual repayment of the loan.
Last week, according to a filing by Iridium with the Securities and Exchange Commission, Chase sent a letter to Iridium and Motorola, saying a "triggering" event had taken place to indicate a default.
"Accordingly," the filing said, "Iridium is required to demand that Motorola provide a guarantee of $300 million of Iridium's borrowings . . . and that Iridium has failed to make such a demand on a timely basis."
The filing did not specify what this "triggering" event was, and both Iridium and Motorola denied there was one. Chase declined to comment.
Michelle Lyle, spokesperson for D.C.-based Iridium, said the company was given an extension to Aug. 11 to make its payment on the loan. It was unclear why Chase chose to act now, she said, although Iridium said in its filing that Chase is trying to "preserve" its position.
For the longer term, Iridium is trying to negotiate a restructuring of its debt with lenders, creditors and major partners. "We are having good, ongoing negotiations and we're not negotiating in the press," Lyle said.
"We disagree with Chase's contention," added Scott Wyman, a spokesman for Motorola, which owns about 18 percent of Iridium. "And we don't believe we're liable at all." Iridium spent nearly a decade--and borrowed $3 billion--pioneering a phone service that lets users place calls from anywhere on earth through a network of low-orbiting satellites. Since the service was launched late last year, Iridium has been hobbled by technical problems, financial shortfalls and departures by key executives.
In addition to its loan deadline next week, Iridium faces a deadline on $90 million in interest payments on high-yield bonds. Industry watchers yesterday said that next week would be a crucial time in determining Iridium's long-term viability. As for the letter from Chase, some viewed it as an incremental development.
"I wouldn't read too much into this," said Riyad Said of Arlington-based Friedman, Billings, Ramsey Group Inc.