Court To Review
Castle Harlan Bid For Iridium
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Iridium LLC has asked the U.S.
Bankruptcy Court in Manhattan to approve the sale of its
satellites to New York-based merchant bank Castle Harlan Inc. for
US$50 million.  Castle
Harlan has proposed
acquiring the assets of Iridium for US$50 million, plus an equity
consideration in the successor entity. A hearing is scheduled for
June 7. If the judge accepts the motion to sell the assets to
Castle Harlan and its non-binding letter of intent, the company
will get 45 days to determine whether its business plan will work.
If it is determined that the
plan is not viable, Castle
Harlan is under no obligation to proceed with the acquisition.
Castle Harlan
would not assume Iridium's estimated US$4.4 billion in debt.
Creditors and other groups that hoped to buy Iridium's assets have
until June 5 to file objections to the proposed deal with Castle
Harlan. Iridium has invited
competing bids by other parties to be submitted by July 28. Iridium
asked in its filing that a hearing be held July 31 to determine
the winning bidder.
Motorola
which has continued maintaining the satellites, will not
make any investment in the new venture, and has set a one-month
deadline for resolving certain unidentified issues to keep the
satellites running. Motorola has been spending “several million
dollars” per month to operate the satellites. About
a dozen of the Iridium satellites are tumbling, or no longer in
their intended position. Should the Iridium constellation
eventually be deorbited, some of the satellites may remain in
space, because they can't be controlled. Iridium gained
more time to look for a buyer because of delays in getting
approvals from the National Aeronautics and Space Administration
for its plan to deorbit the satellites. The constellation of 66
active and six backup satellites cost an estimated US$5 billion to
build and deploy.
Crescent
Communications Inc., Los Angeles, who bid US$25 million, in March,
and last week raised their bid to US$50 million for the
constellation, will likely object to the sale to Castle Harlan. IR
Acquisition Group, Minneapolis, offered US$61 million for the
assets of Iridium. The status of that offer is unknown
The
proposal filed by Iridium provides an opportunity for others to
file rival bids for the satellites. If another party should outbid
Castle Harlan, the investment company is, according to the terms
of the proposed deal, entitled to a US$2 million breakup fee.
Iridium
picked Castle Harlan from among four companies making offers. The
proposed Castle Harlan deal outlined in the court filing shows
that the two companies came to terms on their plan May 26. Money
for the purchase would come from a US$630 million fund managed by
Castle Harlan. Castle Harlan Inc., manages two investment funds
worth more than $1 billion and has an ownership stake in 19
restaurant chains, manufacturing and transportation companies.
John K. Castle, Castle Harlan co-founder, has declined to comment
on how the company will use the satellites.
The
May 26 agreement would allow Castle Harlan to purchase the assets
for US$50 million in cash plus US$900,000 a month,
from the time the court approves the sale until the deal closes.
Castle Harlan would also give Iridium's senior lenders 5 percent
of the equity of the purchasing entity. The purchase would include
inventory, rights to satellites, certain related contracts and
licenses, trademarks and patents, and even Iridium's furniture.
It
is unclear whether the group of unsecured creditors, with claims
of up to US$3 billion, will challenge the deal because it's too
early to know whether the plan would benefit creditors.
A
prospective buyer will likely be required to put up as much as
US$60 million to fund deorbiting the satellites should the new
owners fail to make the new business work.
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