Iridium irons out global settlement with Motorola, committee and lenders

By Caroline Salls

Pittsburgh, April 23 - Iridium LLC has reached a global settlement with Motorola Inc., Iridium's statutory committee of unsecured creditors and its lenders, which leaves Iridium's remaining assets in tact for distribution to its creditors, according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, the committee has sought to recover at least $3.45 billion from Motorola, Iridium's former parent, arguing that the company was liable for Iridium's meltdown because it unloaded a poor business plan and enormous debt upon the start-up and that the creditors were therefore entitled to billions of dollars in recouped losses.

In August 2007, bankruptcy judge James Peck dismissed four of eight claims brought by Iridium's unsecured creditors against Motorola, saying that the creditors had failed to prove that Iridium was insolvent leading up to its failed satellite phone system in 1998.

The creditors and Motorola entered into mediation last autumn in hopes of reaching a consensual agreement over allegations that Motorola breached its contract of fiduciary duty.

Iridium said the settlement resolves remaining issues related to a 2001 adversary proceeding, the potential appeal of the initial judgment in favor of Motorola, Motorola's claims against Iridium, potential surcharge claims against the lenders' collateral, the remand of the approval of a 2001 Motorola settlement and how Iridium's remaining assets are to be distributed in the Chapter 11 case.

Under the agreement, Motorola and Iridium will each release each other from all claims, leaving Iridium's remaining $54 million in cash and the 5% membership interest in Iridium Satellite LLC for distribution.

Iridium said the lenders will receive $33.64 million in cash and the 5% Iridium Satellite membership interest, including any future distributions on account of the membership interest.

Meanwhile, unsecured creditors are expected to receive a $15.65 million distribution, for a 1% recovery.

Motorola, the lender agent and the lenders will not have any further claims to Iridium's remaining cash, which will be distributed under a Chapter 7 or liquidating Chapter 11 plan.

A hearing on approval of the settlement agreement is scheduled for May 20.

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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