Live Deal: Castle Harlan Bids $50M to Keep Iridium in Orbit –

Judge Cornelius Blackshear approved Castle Harlan Inc.’s bid to acquire the assets of bankrupt communications company Iridium LLC at a court hearing June 7 before the U.S. Bankruptcy Court for the Southern District of New York.

Castle Harlan, a New York-based merchant bank, offered to purchase the Iridium assets for $50 million plus a reported 5% equity interest in the successor entity. With the approval of the proposal, Castle Harlan now has 45 days from the day of the hearing to conduct due diligence to evaluate the business plan.

Iridium is a $5 billion global satellite communications system backed by Motorola Inc., which owns 18% of the company. Iridium intended to provide worldwide wireless phone service worldwide with its network of 66 satellites currently in orbit. However, the company was unable to attract enough subscribers to maintain the company. Subsequently, the company filed for bankruptcy last August. The demise of Iridium cost Motorola an estimated $2 billion.

In March, before Iridium had received any bids despite a desperate attempt to locate interested parties, Iridium announced it would be have to begin cutting its satellites off, allowing them to burn up into the atmosphere. Castle Harlan will now reportedly pay $900,000 each month until the deal closes to keep Iridium operating. If Castle Harlan does not acquire Iridium, the firm will be reimbursed these expenses as well as any other “actual out-of-pocket expenses and costs” related to the transaction, including legal and advisory fees and a $2 million “break-up fee”, according to the May 31 Motion to Order.

California-based Venture Partners Inc., backed by General Dynamics Corp. has since made a competing bid, also for $50 million. After complaints that the $2 million break-up fee was giving Castle Harlan an unfair advantage by raising the price for competitors, the Judge said the fee would be waived if the firm could present $50 million within 10 days.

Another hearing has been set for July 31 to rule on Iridium’s bids.

Official from Castle Harlan declined comment on the transaction at this time.