Firm Offers to Buy Iridium Assets
A prominent investment firm is offering to save the Iridium satellite telephone venture from destruction with a $50-million bid to acquire all of the bankrupt company’s assets.
New York-based Castle Harlan Inc. revealed Thursday that it has submitted a proposal to the federal court overseeing the bankruptcy case, which had seemingly reached a climax in March when a judge approved Iridium’s request to cease operations and destroy its $5-billion constellation of more than 66 satellites by pulling them from orbit.
Motorola Inc., the lead investor in one of the costliest business debacles in history, had quietly kept the satellites running during the last few months, hopeful a last-minute bidder might emerge. The chances of finding a savior seemed slim once wireless pioneer Craig McCaw withdrew plans to bail out the company in early March, however.
Schaumburg, Ill.-based Motorola said it will not make any investment in Castle Harlan’s venture and set a one-month deadline for resolving certain unidentified issues to keep the satellites running.
“Motorola has been in discussions with Castle Harlan for several weeks,” Motorola said in a statement read by spokesman Rusty Brashear. “We have been working with them on various issues related to their potential acquisition, and we need to have all those issues resolved by the end of June.”
Brashear estimated that Motorola has been spending “several millions dollars” per month to operate the satellites.
“We’ve been running this constellation at our own expense for several months, so we don’t want to see a protracted discussion period for this,” he said. Brashear declined to elaborate.
The Castle Harlan proposal, which would also include a monthly payment of $900,000 from the time the court approves the sale until the deal closes, will be considered at a Wednesday hearing requested by Iridium.
The request by Washington-based Iridium invites competing bids by other parties to be submitted by July 28. At $50 million, Castle Harlan would be buying the satellite system for just a penny or two on the dollar, compared with what it cost to build and launch the system.
Iridium began its mobile phone service in late 1998 but quickly stumbled amid complaints about large clunky phones and prohibitive prices--as much as $3,000 per phone and up to $7 per minute for calls.
Prices for the phones and calls were cut sharply last summer, but they came too late to restore customer confidence, especially with an aggressive new rival, Globalstar Telecommunications, introducing service in recent months.
Castle Harlan was co-founded by John K. Castle, who is the former chief executive of Donaldson Lufkin & Jenrette, the investment firm that has been advising Iridium.
