NEW YORK-Globalstar Telecommunications Ltd. plans additional financing to help build and launch 56 low-earth-orbit satellites for digital wireless voice and data service covering most of the world by mid-to-late 1998.
Headquartered in New York, Globalstar is a limited partnership led by Loral Space & Communications Ltd. In addition, the partnership includes Qualcomm Inc., which is its co-founder, Alcatel, Hyundai, Finmeccanica, Daimler-Benz Aerospace, AirTouch Communications Inc., Dacom Corp., France Telecom and Vodafone Group plc.
Globalstar has proposed the public issuance of $250 million in senior notes due 2004, accompanied by warrants that holders of those notes can exercise in order to purchase its common stock in a private offering. Moody’s Investors Service, New York, announced it assigned a speculative grade rating of B3 to the proposed note sale.
Globalstar also anticipates raising proceeds of $141 million through the exercise of outstanding warrants issued in April 1996 to purchase 5.3 million shares of its common stock at $26.50 per share. “An understanding with the warrant holders has been reached that will result in the immediate exercise and prompt registration of the GTL (common stock) shares for resale,” Globalstar said. The company’s stock trades on Nasdaq. Many of its warrant holders are members of its partnership.
As of its February rating announcement, Moody’s said Globalstar had about $940 million invested, and needs to raise an additional $800 million.
The rating agency said the risks to purchasers of Globalstar debt include: the partnership’s need for substantial additional capital before service launch; its need to generate enough cash flow during its operational phase to fund ongoing replacement of LEO satellites, which have a minimum expected useful life of 7.5 years; and the risks of technology and launch problems with the satellites.
According to Moody’s, Globalstar is positioning itself to “provide telephony services in places that lack or are underserved by basic landline and wireless telephone service … (and) anticipates providing mobile handheld, vehicle-mounted and fixed telephone service.”
Globalstar is concentrating on the satellite construction, deployment, maintenance and replacement aspects of its communications network. It has, according to Moody’s, designated service providers responsible in their respective territories for regulatory approvals, marketing, pricing and distribution. The service providers will pay fees to Globalstar that include “a rate that will range between 35 cents and 55 cents per minute,” Moody’s said.