Iridium LLC, the ailing global satellite telephone pioneer, is close to an agreement with its creditors to restructure its finances as crucial deadlines approach later this week, sources close to the negotiations say.
Details are still under discussion in marathon negotiating sessions. Dow Jones News Service reported yesterday that the group is discussing a plan to offer 44 percent of the company's equity to the holders of $1.45 billion in public debt. This plan would require Motorola to pump another $400 million in cash into Iridium, bringing its ownership share of the satellite company to 25 percent from 18 percent. Motorola is currently Iridium's largest shareholder.
But sources close to the discussions warn that many of the particulars are still up in the air, with no assurance that the details being discussed at any one moment will be part of the final package.
The company and its partners are under tremendous pressure to act quickly. On Wednesday, an extension granted to the company by its bankers will expire--the third so far they have provided on about $800 million in bank debts tied to optimistic sales projections that the company cannot possibly meet.
And on Sunday, the company must pay $90 million in interest on its $1.45 billion in outstanding bonds, as a 30-day grace period invoked by Iridium expires. If the company cannot reach a restructuring agreement, those bondholders could force it into bankruptcy. The company has repeatedly stated that it does not intend to pursue bankruptcy protection, although investors--including Motorola--have discussed it as an option.
One investor who asked that his name not be used suggested the most favorable resolution of the Iridium deal would resemble a bankruptcy proceeding in which the company's creditors would agree beforehand to accept a set amount of return on what is owed them.
That kind of arrangement--known as a "pre-packaged bankruptcy"--could allow the company to achieve the restructuring quickly and move on to rebuild its business, the investor said. "If everybody can agree how to cut up the baby, it's in everybody's best interests" to do so, he said.
An Iridium spokeswoman said the company will not comment during the restructuring talks. "It's not appropriate for me to comment day by day," said spokeswoman Michelle Lyle.
A spokesman for Motorola said his company, too, could not comment. "The negotiations are continuing, and we are not commenting on the day-to-day progress," said Scott Wyman, a spokesman for the Schaumburg, Ill.-based company. "We're not discussing any details whatsoever."
One bond market player who has been snapping up Iridium debt said he and other investors believe in the company's future. Gene Fattore of Windigo Partners LLC, a "vulture" fund that buys the debt of troubled companies at steep discounts, said, "The people who have bought the bonds believe that there is value here."
Rivals to Unite
EMC has agreed to buy Data General for about $1.2 billion in stock and debt. Each share of Data General will be exchanged for 0.3262 share of EMC.
Business: World's largest maker of computer-storage systems.
Based: Hopkinton, Mass.
Chief executive: Michael C. Ruettgers
1998 revenue: $4.0 billion
1998 earnings: $793 million
Web site: www.emc.com
Yesterday's closing stock price: $57, down $3 on the NYSE (ticker EMC).
Business: Designs, manufactures and supports servers, high-end storage products and other computer systems.
Based: Westborough, Mass.
Chief executive: Ronald L. Skates
1998 revenue: $1.5 billion
1998 loss: $152 million
Web site: www.dg.com
Yesterday's closing stock price: $17.43, up $4.25 on the NYSE (ticker DGN)
SOURCES: Hoover's, Bloomberg News