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Iridium crisis nears

Motorola bullish about satphone company's survival, even as the banks close in for the kill

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Motorola yesterday put on a brave face to stress that Iridium, the troubled satellite cellphone service, can survive -- even as it emerged one of Iridium's creditor's, Chase Manhattan Bank, is demanding repayment of an $800 million loan. Motorola is intimately tied to Iridium's fortunes -- it founded the now spun-off company, in which it holds an 18 per cent stake, and has guaranteed the Iridium's debt -- so it's clearly keen to stave off Iridium's collapse into bankruptcy. That said, last month Motorola admitted it would end its support for Iridium if other investors didn't act to help out both financially and by supporting the cellphone company's restructure programme. Yesterday, Motorola president and COO Robert Growney told analysts that negotiations with other Iridium partners had gone well. "We have had good constructive discussions in the past two weeks," he said. Details of what was discussed were not disclosed, but you get the impression there's a lot of jockeying for the best deal going on as partners attempt to minimise their own risk and maximise others' for whichever possible outcome for Iridium's future -- bankruptcy or restructuring -- materialises. That certainly appears to be the case with Chase Manhattan. According to Iridium filings with the US Securities and Exchange Commission, the bank is claiming Iridium has defaulted on its $800 million loan, arranged by Chase and Barclays, and it wants Iridium to force Motorola to cough up a $300 million load guarantee. It's that debt guarantee provision that underlies Motorola's demands for more support from its fellow Iridium investors. The concern here is that all this financial brinkmanship is masking the real issue: can Iridium, as a business, be made to work? All the battling suggests that, despite Growney's claims, many if not all of Iridium's investors have decided that the answer to that question is a negative, and all that remains to do is limit the financial impact of their investment. If they're unwilling to continue with the project, Motorola's statements to date will force it to cut its losses too, and that's it for Iridium. The crisis point will come on 11 August when Iridium hits the next deadline on its debt repayment, delayed from 30 June, and before that 31 May. Chase's move, made on 29 July, suggest that it has lost patience with the company and will not support a further extension. ® See also Satphone giants face the Buck Rogers bust

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