McCaw-Led Group to Pump $74.6 Million Into Iridium

An investment group led by cellular phone pioneer Craig O. McCaw reached an agreement Wednesday to provide $74.6 million in temporary financing for the stricken Iridium satellite network--enough to keep it operating for four more months while McCaw decides whether to take over the company.

Iridium has been operating under Chapter 11 of the bankruptcy code since Aug. 13.

“We think there’s potential here,” said Bob Ratliffe, a vice president at McCaw’s Kirkland, Wash.-based Eagle River Investments. “That’s why we’re going to take a longer look at it.”

McCaw, who assembled a nationwide network of cellular systems and sold it in 1994 to AT&T; for $11.5 billion, has turned his attention to satellite communications in recent years, in part as founder of Teledesic, which plans to launch as many as 288 satellites to provide high-speed Internet service globally starting in 2004. He also heads a group that has agreed to provide as much as $1.2 billion to rescue another satellite communications company, ICO Global Communications, from bankruptcy.

Industry observers and sources close to McCaw say he is hoping to use ICO, and possibly Iridium, to start offering a Teledesic-style service before launching its full complement of satellites. But many say Iridium’s real attraction is its fire-sale price rather than its technology, which is unsuitable for most data communications.

McCaw’s investment in Iridium, which must be approved by a bankruptcy judge, comes just as the company was facing liquidation. The company’s last cash infusion, $20 million from Motorola Corp., is to run out next week. Motorola, which had been Iridium’s major backer, has said it would not keep the system alive after that if no other investors came forward. Iridium has about $4 billion in debt, monthly revenue of roughly $1.5 million and monthly operating expenses of more than $10 million.

The money from the McCaw group, which includes an undisclosed contribution from Motorola, is designed to cover the company’s expenses until June 15. At that point, it anticipates “emergence from bankruptcy under the control of Craig McCaw,” said John Richardson, Iridium’s chairman and chief executive.

A network of 66 low-orbit satellites, Iridium was conceived by engineers at Motorola as a way of providing telephone service to users working in remote areas of the globe or at sea. The system ran into trouble because its bulky hand-held receivers were ridiculed as unreliable and difficult to use.