IRIDIUM DEBTORS GET OKAY FOR $2 BILLION SUIT AGAINST MOTOROLA
Iridium creditors received approval Tues. from U.S. Bankruptcy Court, Manhattan, to proceed with lawsuit against Motorola, which was primary investor in failed satellite telephone venture that was purchased out of bankruptcy by new group last Dec. (CD Dec 13 p7). Court filing called settlement “watershed event” and said approval of settlement motion was “first good news” creditors had received since Iridium entered bankruptcy. Under terms of settlement, Iridium creditors will seek $2 billion in suit against Motorola. Settlement also brings end to legal dispute between secured bank lenders and unsecured creditors.
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In suit filed last year, creditors accused Motorola of causing Iridium to negotiate and sign contracts that hurt Iridium but netted Motorola billions of dollars in revenue. Suit also alleges Motorola structured its contracts with Iridium so that computer software that managed satellite system remained in its control. Suit had been delayed while court resolved debt recovery action involving secured bank lenders and unsecured creditors.
Both groups have agreed to consolidate their legal actions against Motorola by creating new company, Iridium Litigation LLC, that will manage legal actions with aid of $47 million approved by court for legal fees needed for 2 groups to move forward. At our deadline, attorneys for Iridium debtors hadn’t responded to phone call or written questions as requested. Motorola didn’t respond to phone calls, either, but when suit was filed it denied accusations. Company said on several occasions that it was Iridium creditor like others, continued to operate satellite system when Iridium went under and had to eat loss of $2.5 billion.
It’s more bad news for Motorola, which recently warned it could report first quarterly loss in 15 years and started major cost-cutting plan that includes plant closures and layoffs. Spokesman for new Iridium group, which is preparing to begin service at end of month following quiet period, said action “involves the old company” and had “no bearing” on future plans of new Iridium group. “We are no way involved in that.”