Iridium refinancing boosts Quadrant's bottom line

Stuart Corner
Monday, 07 August 2006 13:55

IT Industry - Strategy

Melbourne based Quadrant Iridium (ASX: QAD) says it will add around $800,000 to its annual profits following the full return of capital from global mobile satellite operator Iridium, which has just completed new loan financing arrangements worth $US210 million.

The Quadrant Iridium connection dates from 2000. The global satellite network was conceived by Motorola in the early 1990s. It was built by the first Iridium company at a cost of around $US6.5 billion. Motorola was the prime contractor for the project and a major shareholder. But by 1999 Iridium was bankrupt and the network on the verge of being shutdown.

It was 'rescued' by a new company, Iridium Satellite LLC for the paltry sum of $US25 million. However the real rescuer was the US Department of Defence which signed a $US72 million long term service contract (which in the troubled post 9/11 world has proved to be of enormous value).

Australian company Bareena Pty Ltd was a significant member of the buyout consortium and initially held a 25.6 percent stake in the 'new' Iridium company. Bareena subsequently went public through a backdoor listing of  Quadrant, then a Western Australian mining company.

Since its near-death experience, freed from its massive debt, the revamped Iridium has prospered. The company posted a 25.4 percent increase in subscribers and a 31.4 percent increase in revenues in the second quarter of 2006, when compared to the same period of 2005.

Iridium said it would use the net proceeds of the new credit facilities to repay existing credit facilities, provide cash collateral for a letter of credit, return capital to the company's equity investors, and for general corporate purposes including development of new and advanced devices and services.

Quadrant Iridium said that it had now received the full return of its $US20.8  million investment in Iridium in the form of $US8.2 million in cash and the release of the guarantee letters of credit for $US12.6m. Quadrant Iridium said this latter would result in an estimated increase of $A800,000 per annum to its bottom line.

"The return of capital along with the activation of various options and warrants will result in a dilution of Quadrant Iridium’s indirect holding in Iridium Holdings LLC from 8.8 percent to 6.35 percent," the company said in a statement to the ASX.

The company said it would use the funds to "extinguish all debt and  capitalise on its opportunities within the Healthcare industry."