Struggling satellite phone group Iridium was dealt another blow last week after Chase Manhattan Bank claimed the vendor had defaulted on its $800m loan.
Chase sent out a letter to Motorola, Iridium's largest investor, stating that a triggering event - which it declined to elaborate on - caused the company to default on its credit agreement. Chase has demanded Motorola provide a guarantee of $300m of Iridium's borrowings.
In a statement, Iridium defended its position by claiming that it and Motorola, which holds an 18 percent stake in the venture, believed no such triggering event had occurred and it had not defaulted on the loan.
If Iridium does default on the loan, it could also affect another $750m credit agreement which is guaranteed by Motorola.
The intervention of Chase is another setback for Iridium, which is undergoing a restructure in an attempt to save it from bankruptcy. The company recently stated that it planned to exercise its right to extend the payment date for interest on its high yield bonds, which amount to $90m. The move sparked fears that Iridium would miss the payment altogether, resulting in a Chapter 11 bankruptcy court filing.
The day before the letter was received, Motorola held a briefing giving an optimistic view of the ailing company's future. Robert Growney, chief operating officer of Motorola, stated there had been positive movements in developing a restructure plan and was hopeful that a fresh model for the business could be found through working closely with the new management.
The $5bn venture still has a long way to go before it is out of trouble.
Motorola has already admitted that it will provide no further financial support to Iridium beyond its contractual obligations.
Shares in Motorola dived $4.07 to $88.88 on Nasdaq following the Chase announcement. Meanwhile, Iridium's price continued to fall, and stood at $5.88 on 6 August.
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