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Motorola settles Iridium suits

Motorola will pay approximately $12 million to resolve five lender-related lawsuits by Chase Manhattan Bank regarding its involvement with the bankrupt satellite phone company.

Motorola announced Thursday that it will pay approximately $12 million in an out-of-court settlement with secured lenders of satellite phone company Iridium.

The settlement resolves five lender-related lawsuits by Chase Manhattan Bank, including one seeking $800 million. However, Motorola still faces a lawsuit by unsecured creditors seeking more than $4 billion in damages.

Motorola was a major backer of Iridium, which debuted in 1998 as the world's first satellite-phone service. But the network was consumed by high costs and low demand and filed for Chapter 11 bankruptcy protection less than a year after launching.

The satellite phone industry--born with much fanfare in the 1990s--has failed to attract mass-market appeal with its bulky handsets and expensive calls that average about $6 a minute. Other industry players, such as Globalstar Telecommunications, also have filed for bankruptcy, leaving a legacy of financial pain among investors and lenders.

One of the lawsuits, filed by Chase and 17 other lenders, alleged Motorola and Iridium had "fraudulently induced" the lenders into signing a senior secured credit agreement--a claim that Motorola denies. The lawsuit sought the balance of an $800 million loan, plus interest and expenses.

The settlement also resolves claims against Motorola in a $50 million reserve capital call complaint, as well as counter-claims and appeals that the company was intending to seek against the lenders.

While Motorola still faces a multibillion-dollar lawsuit with Iridium's unsecured creditors, the company said it believes it has a "strong defense" to the claims and will continue to defend the case.