Another Bid For Iridium Surfaces

Iridium LLC and Motorola have endorsed a US$25 million bid for the Iridium satellite constellation from a group of investors using the name Iridium Satellite LLC. Under the proposal, Iridium LLC would receive US$6.5 million when the sale is completed and the US$18.5 million balance over the next several years. Motorola would provide a US$30 million bridge loan to the buyers to cover the costs of operating the system during the several-month period it is transferred to Boeing's control. The committee of unsecured creditors hasn't commented on the proposed sale to Iridium Satellite LLC.

The proposed deal would largely end the involvement of Motorola, though Motorola would retain a 2 percent stake in the satellite system (currently Motorola has 19% equity). As part of the proposed sale, Motorola would turn over responsibility for operating the system to Boeing. Boeing would operate the system for the prospective buyers. Boeing has elected to not make an equity investment in the satellites. Boeing would use many of the same facilities and employees being used by Motorola to keep the Iridium satellites operational. Boeing must get U.S. Federal Communications Commission (FCC) approval to transfer licenses to operate the satellites from Motorola, which should take only a few months.

Iridium Satellite LLC is led by Daniel A. Colussy, a director of Constellation Energy Group, Baltimore. Mr. Colussy was chairman and chief executive of UNC Inc., an Annapolis company that overhauled airplanes, which was bought out by Greenwich Air Services Inc. for US$320 million in 1997. Former Iridium LLC Chief Executive Edward Staiano is also believed to be part of this new investment group. Other investors in the group may have been involved in an earlier attempt by New York-based merchant bank Castle Harlan Inc. to buy the satellite system. That deal fell apart in July, when Castle Harlan pulled out of the talks.

Mr. Colussy has been negotiating with Motorola since late July. The bidders paid Motorola a US$200,000 deposit on October 18. Other parties can still submit competing bids. A hearing is scheduled at the U.S. Bankruptcy Court in Manhattan on November 8 to seek court approval of the Iridium Satellite LLC bid. In a motion before the court Iridium LLC has requested approval of the sale terms that Mr. Colussy and his co-investors have presented, arguing that they have the money to operate the satellites. The court must approve any sale. The companies hope to close the deal by November 30. The Iridium Satellite LLC bid does not indicate how the new company plans to make money, should the court awards it Iridium's assets.

Sources indicate the U.S. Department of Defense would like to preserve the satellite system and likely will pay an unspecified amount for Iridium phone service, ensuring the satellite system would have an anchor source of revenues.  
  

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