Iridium's fate wavers

All Craig McCaw wanted was to lift Iridium from its financial doldrums and transform it into something profitable. Considering the satellite communications company's dire situation, the deal should have been cut and dry.

But, the cellular telecom pioneer's offer did not satisfy some Iridium investors. A potential bondholder suit against the company's main financial backer Motorola has left analysts guessing how the story will end.

Iridium bondholders sought permission from a bankruptcy court to sue Motorola for more than $2 billion last Tuesday. Although McCaw originally offered to pay $600 million for Iridium, some analysts speculated that the offering included a pledge that bondholders could agree not to sue Motorola in exchange for a minor settlement. Because bondholders thought they could get more by suing a company with deep pockets, a judge was left to decide Iridium's fate. A decision is expected to be reached quickly.

For McCaw's Eagle River Investments, such upheaval is par for the course. However, if the court finds evidence that Motorola deliberately misled bondholders, then McCaw's plans to resurrect Iridium will be delayed further.

"All lawsuits are expected during a bankruptcy situation," said Bob Ratliffe, vice president of Eagle River. "The fact they have to sue to get their money back is unfortunate. We have no interest in buying a company that is saddled in debt."

Iridium reportedly owes bondholders between $1 billion and $2 billion, and McCaw's plan would render the stakes of unsecured debt holders and common stock worthless.

Motorola declined to comment regarding the litigation.

"It would be foolish not to try and get their money back," said Ken Hyers, an analyst with Cahners In-Stat Group. "While [McCaw and Motorola] will inject money, the debt will be wiped out completely. Maintaining ownership of something that is nearly worthless is still worth more than nothing."