Communications equipment vendor Motorola is suing MSS operator 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…
Communications equipment vendor Motorola is suing MSS operator 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.
