Iridium is in active discussions with and has made applications to both the French and US export credit agencies, Coface and the Export-Import Bank, to secure a financing package to partially fund its next generation constellation, Iridium NEXT.
The…
Iridium is in active discussions with and has made applications to both the French and US export credit agencies, Coface and the Export-Import Bank, to secure a financing package to partially fund its next generation constellation, Iridium NEXT.
The satellite operator has mandated Goldman Sachs, Societe Generale and Hawkpoint to advise it on securing ECA backing. Societe Generale has worked on the Coface-backed financing facilities for Globalstar, O3b Networks and SES.
Iridium revealed more details about its external financing plans in an investor presentation released in its SEC filings. The company outlined that it is seeking ECA support for a facility of up to US$1.5bn. The debt would have a term of up to ten years with repayment anticipated to begin in 2017. Iridium also stipulated that it would seek the same favourable financing terms that Globalstar achieved on its Coface-backed debt facility.
The company added that if the final ECA backed financing is not sufficient for its requirements then the remainder would be secured thorough additional unsecured/subordinated corporate debt.
Iridium said that the ECA-backed debt financing “would likely be issued in conjunction with signing with a prime contractor to build Iridium NEXT constellation.”Indeed, the ability to secure export credit support is a key factor in determining whether Lockheed Martin or Thales Alenia Space will be selected.
Iridium CEO Matt Desch previously told SatelliteFinance: “Both understand that providing low-cost and attractive financing might be what separates the winner from the loser, and Export Credit Agency financing is certainly the most attractive form of financing available right now.”
Iridium stated that it anticipates securing ECA financing by mid-2010 in conjunction with the selection of the Iridium NEXT prime contractor. The initial batch of satellites from the new constellation is then expected to be launched in 2014, which is also when the company anticipates its capex requirements for the new system will reach their peak.
Iridium has always maintained that it will fund a substantial portion of the expected US$2.7bn capex requirement for Iridium NEXT from internal sources, and in the investor presentation it broke down the size of the estimated funding sources. Iridium stated that approximately 50% would be funded through internally-generated operational cash flow, around 35% through external capital, 10% through warrant proceeds and 5% through cash-on-hand. As of September 30, 2009, Iridium’s net cash position was US$127m.
Meanwhile, Iridium has announced that it has selected Hughes Network Systems to develop an Access Network Controller (ANC) in its gateway ground radio control network. The ANC is part of a multi-year plan for Iridium to upgrade and evolve its gateway network in preparation for Iridium NEXT.
Under the development contract, Hughes will design and supply a fully-tested, turnkey ANC system, which will be integrated with Iridium’s existing system, together with training and maintenance. Iridium expects the ANC to be complete and operational by Q4 2011.
Motorola suing Iridium over change of control claim
Communications equipment vendor Motorola is suing Iridium over a breach of the loan agreement between the two which it claims was triggered by GHL Acquisition’s takeover of Iridium in September 2009.
Motorola filed a complaint against Iridium in the Circuit Court of Cook County, Illinois, alleging that the GHL deal constituted a “Change of Control” as defined in the senior subordinated term loan agreement between Motorola and Iridium dated December 11, 2000. This covenant breach triggers an obligation by Iridium to make certain commitment fee and loan success fee payments to Motorola.
Motorola is subsequently claiming damages of at least US$24.68m for Iridium failing to make these payments.
In an SEC filing, Iridium stated: “While the company plans to vigorously defend the matter, discussions are ongoing between Motorola and the company in an effort to resolve the issues between them.
Iridium faces a far bigger issue than just the cost of the damages if a judgement rules in favour of Motorola’s claim. The latter would also have the right to terminate certain intellectual property licenses held by Iridium and its subsidiaries. These licenses cover substantially all the Iridium’s system technology, including software and systems to operate and maintain its network as well as technical information for the design and manufacture of its devices.
Iridium was spun out of Motorola in 1998 prior to going bankrupt in late 1999. With the company on the precipice, Iridium was saved by consortium including Dan Colussy, ex-President of PanAm and Canadian Pacific airlines, in late 2000. As part of that deal Motorola provided a US$30m loan to fund the continuing operation of the system.
