Shares of Iridium World Communications Inc. (Nasdaq: IRID) fell 19 percent, or 2 7/8 to 11 5/8, on Friday after the company said it can't meet its covenants on $800 million in debt by the May 31 deadline.
Earlier CE Unterberg Towbin downgraded the company to "hold" from long-term "buy."
The global satellite network company said it couldn't meet the revenue and subscriber goals that were set in the credit facility. Iridium had about $3 billion in debt as of March. By the end of May, Iridium was expected to have $4 million in sales, $30 million in accounts receivable and a minimum of 52,000 subscribers. Iridium needs about $50,000 customers to reach break-even for its cash flow.
Iridium hired Donaldson Lufkin & Jenrette to renegotiate the terms and is still talking to its lenders about the terms of the debt.
The 19 percent Motorola Inc. (NYSE: MOT)-owned company appointed Leo Mondale to the company's chief financial post. The CFO, chief executive and a top marketing executive have left in the last 2 months.
The root Iridium's woes is the difficulty in finding a market. Its sales force is too small to build a customer base, and even if they did find a market, there aren't enough phones available to match their goals. Iridium had 10,294 customers as of March, below the 15,000 projected by Iridium.
Edward Staiano, formerly CEO, sold his shares in Iridium after departing. While not uncommon, it's notable since Iridium shares are at such a low point.