Motorola ordered to pay Iridium lenders $300 m

CHICAGO: Wireless technology giant Motorola Inc. was ordered to pay $300

million to Chase Manhattan Bank and other lenders to satisfy part of a loan made

to Iridium LLC, its failed satellite-phone company.

US District Court Judge Alvin H. Hellerstein ruled late Monday that Motorola,

the world's second largest maker of mobile phones behind Finland's Nokia, must

pay Chase and the other lenders in the group the $300 million guaranty assumed

by Motorola in 1998.

Chase Manhattan is a unit of J P Morgan Chase & Co. "There is no

right on the part of Motorola to be excused from its obligation to provide its

guarantee," Hellerstein said, according to a transcript of his ruling.

"There is an obligation on the part of Motorola to deliver that

guarantee obligation in response to the demand that Chase made," he added.

Motorola, based in the Chicago suburb of Schaumburg, Illinois, disagreed with

the decision and said there were grounds for an appeal.

"It continues to be our position that there was no breach of contract by

Motorola relating to Chase's decision to loan money to Iridium LLC and that

Motorola does not owe Chase the $300 million," the company said in a

statement.

"The people who invested in Iridium LLC, or lent money to it, were very

sophisticated investors," Motorola added. "They knew the risks

involved, It is not unlike when you drill for oil, there is always the potential

of ending up with a dry hole. Regrettably, this was a 'telecom dry hole'

relative to the grand hopes we all had."

Motorola officials declined to discuss the ruling further. J P Morgan

spokesman Adam Castellani simply said his company was pleased with the decision.

Chase had claimed Iridium LLC was controlled by Motorola.

Iridium, which Motorola created and in which it held an 18 per cent stake,

received an $800 million loan from Chase Manhattan and several other lenders in

December 1998 and filed for bankruptcy court protection eight months later. The

Iridium lenders claimed in the complaint that Motorola owed them the $300

million under a loan guarantee agreement, as well as interest and legal fees.

The non-jury trial began in November.

Chase Manhattan and 17 other lenders also filed a complaint in the State

Supreme Court of New York in October seeking recovery of the remaining portion

of the unpaid loans from Motorola, not just the $300 million loan guarantee.

Iridium LLC's unsecured creditors filed a lawsuit in bankruptcy court in July

2001 against Motorola for more than $4 billion in damages.

Iridium LLC's assets were purchased for $25 million in December 2000 by a

group of investors who renamed the company Iridium Satellite Corp.

(C) Reuters Limited.