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Iridium closer to brink
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August 11, 1999: 7:51 p.m. ET
Global satellite telephone operator defaults on $1.5 billion of its debt
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NEW YORK (CNNfn) - Satellite telecommunications concern Iridum LLC Wednesday defaulted on $1.5 billion of its outstanding debt, sending the plagued company one step closer to insolvency.
In a brief statement, Iridium confirmed it missed its obligation to make payments toward two secured lines of credit - one for $800 million and another for $750 million. Iridium had been given a firm deadline of Aug. 11 to make some kind of payment toward the debt - that was the third extension Iridium received.
The defaults have the potential to lead Iridium to bankruptcy. The telecommunications company has experienced significant financial difficulties in the past 12 months, mostly because it's had difficulty gaining subscribers for its global telephone service. Iridium's options include restructuring out of court, seeking Chapter 11 bankruptcy protection in court, or dismantling its business by liquidating assets.
The defaults also have the potential to hurt telecommunications equipment maker Motorola Inc., Iridium's original backer, a key shareholder and one of its loan guarantors. Motorola holds about 18 percent of Iridium equity. The Schaumburg, Ill.-based company is the guarantor of the $750 million loan in default. The other $800 million loan is secured by a contingent led by Chase Manhattan Bank.
The next hurdle for Washington, D.C.-based Iridium comes August 15, when it must make a $90 million interest payment on another $1.45 billion in senior notes. The payment was originally due July 15, but Iridium exercised a 30-day grace period.
Iridium shares closed down 3/8 at 5-15/16 on the Nasdaq exchange. Motorola shares rose 3-13/16 to 93 on the New York Stock Exchange. 
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Iridium
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