Iridium Communications has finally signed the Coface-backed US$1.8bn debt facility that will finance the construction of the MSS operator’s second generation constellation, Iridium NEXT. The credit facility comprises two pro rata tranches, one of up to…
Iridium Communications has finally signed the Coface-backed US$1.8bn debt facility that will finance the construction of the MSS operator’s second generation constellation, Iridium NEXT. The credit facility comprises two pro rata tranches, one of up to US$1.537bn bearing a fixed interest rate of 4.96% per annum and the second of up to US$263m bearing a variable interest rated of 195 basis points over LIBOR. Based on the current six-month LIBOR, the interest rate on this tranche would be 2.41% per annum. The senior secured term loan, which is 95% guaranteed by the French export credit insurance agency Coface, will mature in 2024 with the repayment period beginning from 2017, following substantial completion of the Iridium NEXT launch program. Iridium will also pay a commitment fee of 0.80% per year, in semi-annual instalments, on the undrawn portion of the facility. The debt is being provided by a syndicate of nine European banks led by Deutsche Bank, Banco Santander, Société Générale (the Coface agent), Natixis and Mediobanca, and includes BNP Paribas, Crédit Industriel et Commercial, Intesa Sanpaolo and Unicredit Bank Austria. The funding is now subject to customary closing conditions, which are expected to be met shortly. Société Générale, Goldman Sachs and Hawkpoint Partners advised Iridium on the financing. Under the terms of the facility, any funds drawn must be used either for 85% of the payments to Thales Alenia Space for the construction of Iridium NEXT, the premium for the Coface insurance or the capitalization of a substantial portion of the interest owed during the construction and launch phase. Iridium CEO Matt Desch said that the company expects to spend approximately US$600m by the end of 2011 on the Iridium NEXT program, of which approximately US$400m will be funded under the credit facility. Desch also affirmed that Iridium NEXT continues to be on track: “In the four months since we announced Thales Alenia Space as our prime contractor, they have met the milestones agreed upon for this first phase of the project, and we are off to an excellent start. Our requirements development process is well underway. Planning and design for the satellites and constellation are on schedule. Both our teams and roster of partners are growing quickly.”
Iridium reaches settlement with Motorola
Iridium has also signed a confidential settlement agreement with telecoms equipment provider Motorola. The deal fully and finally settles the litigation filed by Motorola against two Iridium subsidiaries, Iridium Satellite and Iridium Holdings, in February 2010. The telecoms equipment vendor had claimed that GHL Acquisition’s takeover of Iridium in September 2009 constituted a “change of control” as defined in the senior subordinated term loan agreement between the two parties and this covenant breach therefore triggered an obligation by Iridium to make certain commitment fee and loan success fee payments to Motorola. As such, Motorola claimed damages of at least US$24.68m for Iridium failing to make these payments. Under the terms of the settlement agreement, which contains no admission of liability by any party, Iridium will pay Motorola US$46m. US$23m of this has been paid contemporaneously with the execution of the settlement agreement and the remaining US$23m is reflected in a secured promissory note issued to Motorola, which bears an interest of 10% per annum and matures on 31 December 2011. In addition, Iridium and Motorola have terminated the senior subordinated term loan, dated 11 December 2000. The deal also sees Motorola transfer the ownership of certain intellectual property rights as well as the conversion of existing intellectual property licenses from being royalty-based to pre-paid.
