Iridium committee's lender settlement draws Motorola objection for alleged priority rule violation

By Caroline Salls

Pittsburgh, June 22 - Iridium Operating LLC's former parent, Motorola, Inc., objected to a settlement agreement between Iridium's official committee of unsecured creditors and its secured lenders, arguing that the settlement improperly transfers funds out of the reach of the estates into Iridium litigation controlled by the company's more junior unsecured creditors.

According to the objection filed Friday with the U.S. Bankruptcy Court for the Southern District of New York, the settlement involves a plan for distribution of substantially all of the cash of the Iridium estates, resolves challenges to the lenders' liens on the company's assets by paying $100 million to the lenders and transferring $47 million out of the estates to fund a litigation vehicle for the committee to investigate potential claims against Motorola.

Motorola said the proposed settlement represents a major violation of the bankruptcy code's absolute priority rule, so it must be rejected.

Iridium owned and operated a global telecommunications system. The company filed for bankruptcy on Aug. 13, 1999. Its Chapter 11 case number is 99-45005.

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