The satellite telephone firm Iridium, which filed for bankruptcy protection last August, said Thursday it had secured five million dollars in interim financing that will enable it to continue functioning through March 6.
The funds are part of an effort to pave the way for the transfer of Iridium assets and personnel to a new operating company.
A motion approved by the US Bankruptcy Court for the Southern District of New York provides Iridium with funds from Eagle River Investments and Motorola to finance the continued operation of the firm.
An Iridium statement said the company had informed the court that an investor group led by Eagle River would soon put forward a proposal for the purchase of Iridium’s assets.
“We are pleased by this new development,” said Iridium chief executive John Richardson.
“This approach should result in a more expeditious transition to a new operating company, which will benefit our customers.”
Iridium, established in November 1998, filed for bankruptcy under Chapter 11 in August after disclosing it would be unable to meet its obligations on loans worth 1.5 billion dollars.
Chapter 11 allows an indebted company to retain control of its operations while it restructures and works out arrangements with creditors.
Iridium functions with 66 low earth-orbiting satellites in conjunction with existing terrestrial cellular networks.
But the company has been plagued by technical problems and complaints about high prices.
Meanwhile, Japanese telephone company DDI Corp. said Thursday it was scaling down its investment in Iridium .
“We will not make additional investment” in Iridium, DDI president Yusai Okuyama told a regular news conference.
His comment followed a report that the DDI group, including electronics leader Kyocera Corp., had decided to withdraw from its loss-making satellite phone business and cut capital ties with Iridium.
A DDI spokesman said the group’s move “does not amount to withdrawal at the moment” as DDI will keep providing services to 4,300 Nippon Iridium users in Japan.
The DDI group is the largest shareholder of Nippon Iridium Corp., a Tokyo-based firm which has an 11.2 percent stake in the US firm. Motorola Inc. is the largest shareholder of Iridium LLC.
Nippon Iridium “will eventually be liquidated,” the spokesman said.
The DDI group, through Nippon Iridium, had invested 210 million dollars into Iridium LLC, which launched services in November 1998. But the US firm slipped into bankruptcy in August.
In its earnings report for the six months to September, the DDI group put aside loan-loss reserves of some 25 billion yen (227 million dollars) to dispose of losses from its investment in Iridium.
“We are prepared for a situation where our investment will become close to zero,” said the DDI spokesman, who declined to be named.
The DDI group has a combined 60.5 percent stake in Nippon Iridium, with DDI Corp. holding 35.7 percent. Kyocera owns 10.0 percent, Sony Corp. five percent and another 15 Japanese firms the rest.
