Reviving Iridium

The Iridium Venture Contd...

The company could signup only 10,294 customers as against a projection of 57,000, as stipulated in the terms of the $800 million loan taken by the company. The company's sorry state of affairs prompted some of its major investors to file an involuntary Chapter 11 petition against it. Iridium's strategic partners began discussions to work out a financial restructuring plan for the company.

However, they were not able to reach a consensus. Commenting on this development, a member of the Steering Committee¹² that owned about 25% of Iridium's $1.45 billion in outstanding debt said, "Despite the best efforts of the parties involved, consensual agreement could not be reached on a restructuring plan.

It became clear to the various parties at interest that a Chapter 11 filing was inevitable and, unless drastic action was taken, the company's assets could be at serious risk." The company asked its key partners for investments but it did not get any positive replies. Even Motorola refused to invest more money into the failing company. However, it agreed to provide full operational support and a significant amount of technical, sales and marketing support.

The company decided to file for Chapter 11 bankruptcy in August 1999. Iridium also tried to look for some outside buyers, but again in vain. Though Craig McCaw¹³ initially showed some interest, eventually he ended up buying one of Iridium's competitors, ICO Global Communications, which was also bankrupt.

With even the last bidder turning away, Iridium had no other option but to decommission its network of LEOs and stop offering its services.

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12] Iridium's major investors formed a steering committee called the 'Informal Committee of the Holders of the Senior
Notes of Iridium.' Members of this committee were called the members of steering committee.

13] A pioneer in the cellular telephone industry and a leading name in the global wireless communications industry. He
was the Chairman and Co-CEO of Teledesic, the leading US based telecommunications company. He initially made a
$ 75 million offer to buy Iridium but later backed off.

Case Details

Case Code : BSTR031
Themes: Turnaround Strategy
Case Length : 11 Pages
Period : 1999-2001
Organization : Iridium LLC
Pub Date : 2002
Teaching Note : Available
Countries : USA
Industry : Telecommunication

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