Iridium to enter Chapter 11

Announcement made to forestall bondholders' attempt to force the company to make the same move

Ailing satellite-based mobile phone company Iridium yesterday said it intends to file for Chapter 11 bankruptcy protection. The move followed the action of Iridium bondholders to force the company into Chapter 11 in the run-up to Monday's deadline on the payment of $90 million in interest on bonds worth $1.45 billion. Clearly, the bondholders believe isn't going to pay that $90 million -- not least because earlier this week it defaulted on two loans of $800 million and $750 million, respectively. Chapter 11 allows a company to continue operating while it works on a plan to pay back its debts. Iridium CEO John Richardson described Chapter 11 as "the most efficient way to conclude Iridium's restructuring negotiations". Certainly the prospect of bankruptcy should concentrate the minds of Iridium's investors since it finally signals the fact that, without their support for Richardson's proposed restructure, the company will collapse. That said, that's just what Motorola has been saying for months, and it doesn't appear to have done much good to date. ®