Iridium gets OK for liquidation plan

Iridium Operating LLC, the failed satellite-phone unit of Motorola Inc., won approval of a plan to liquidate, resolving its decade-long bankruptcy.

U.S. Bankruptcy Judge James Peck approved Iridium's so- called disclosure statement, or outline of its liquidation plan, in an ordered entered yesterday in Manhattan. The plan calls for general unsecured claims to get less than 1 percent and stockholders to get nothing.

Secured claims will get 100 cents on the dollar.

"The disclosure statement is approved," said the order, signed by Peck. Votes to accept or reject the plan must be cast by 4 p.m. New York time on Oct. 19. A confirmation hearing is set for Oct. 28.

If creditors don't vote in favor of the plan, it would convert to a Chapter 7 liquidation, delaying and reducing the payout to creditors, according to court documents.

Motorola Inc., the biggest U.S. mobile-phone maker, won approval of a settlement with Iridium LLC in May 2008 that eliminated the main obstacle to winding up Iridium's nine-year bankruptcy.

Iridium, a provider of commercial satellite communications, filed for bankruptcy in 1999 after its spinoff by Schaumburg, Illinois-based Motorola. Motorola previously benefited from a bankruptcy court ruling that creditor claims should be limited because it wasn't proven that Motorola misled investors about its satellite-phone technology.

Unsecured Claims

Under the settlement, Iridium was to distribute $16 million to unsecured creditors on claims of $1.6 billion, or a 1 percent recovery. The accord gave $34 million to bank lenders, along with a 5 percent interest in a related company, Iridium Holdings LLC, a parent of successor Iridium Satellite LLC.

The two companies had battled over a variety of issues stemming from Motorola's relationship to Iridium and its creditors, including an agreement to guarantee some of Iridium's debt.

Iridium's operating unit sold all of its operating assets in 2000 to Iridium Satellite. The current plan, filed Sept. 4 in bankruptcy court, provides for the distribution of assets to creditors as called for in the 2008 settlement.

Iridium creditors claimed $4.3 billion against Motorola, and Motorola had claims worth $1.5 billion against Iridium for pre-bankruptcy contracts as well as a $675 million claim for bankruptcy administrative costs.

Iridium also was pursuing recoveries from Motorola that it said were worth $2 billion, under a trust funded with $47 million to cover legal costs. Some of its claims included allegations that Motorola officials breached their fiduciary duty or had known that Iridium's bulky satellite phones, which often didn't work indoors, were destined to fail.

The case is 99-45005, U.S. Bankruptcy Court, Southern District of New York (Manhattan).