In a worst-case scenario, if Globalstar liquidated tomorrow Qualcomm would have to write off that $618 million.
I recall making some negative comments about Globalstar when it was being discussed here late last year. And although I was interested in reading the comments that Mr. Powers began posting on the Globalstar thread a few months ago, I have never considered Globalstar to be a worthwhile investment. However, I am not convinced that they are going to go down in flames during 2001.
I believe Loral will fight quite hard to keep Globalstar alive. A few tidbit from Lorals 10Q filed 11/14/00:
In May 2000, Globalstar finalized $531.1 million of vendor financing
arrangements (including $31.1 million of capitalized interest as of May 2000)
with Qualcomm that replaced the previous $100 million vendor financing
agreement. The vendor financing bears interest at 6%, matures on August 15, 2003
and requires repayment pro rata with the term loans under Globalstar's $500
million credit facility discussed above.
Globalstar's $500 million credit facility is guaranteed by Loral SatCom
Ltd. and Loral Satellite, Inc., wholly owned subsidiaries of Loral. The
guarantee is secured by the pledge of certain assets of Loral and its
subsidiaries, including the stock of the guarantors and the Telstar 6 and
Telstar 7 satellites. Based on third party valuations, management believes that
the fair value of Telstar 6 and Telstar 7 is in excess of this $500 million
credit agreement.
from Globalstar's 10Q filed 11/14/00:
Globalstar's $500 million credit facility contains various financial
condition covenants, one which would require, among other things, that
Globalstar have revenues of $100 million for the 12 month period ended March 31,
2001. Globalstar's revenues for the six months ended September 30, 2000, the
first six months of this period, were $1.9 million. Given the level of revenues
in the first six months of this period, Globalstar anticipates that the growth
in revenues during the subsequent six month period will not be sufficient to
meet its $100 million revenue covenant. If Globalstar cannot satisfy this
covenant, obtain waivers or amendments from a majority of the bank lenders, or
fulfill the $500 million obligation in a form satisfactory to all bank lenders,
Globalstar will be in default under its debt facilities (including vendor
financing) and Globalstar's lenders and bondholders would have the right to
accelerate payment of their loans to Globalstar. Loral SatCom Ltd. and Loral
Satellite Inc., directly and indirectly wholly owned subsidiaries of Loral, have
jointly and severally guaranteed Globalstar's obligation under this credit
agreement. Loral has advised Globalstar that it is currently in negotiations
with the banks to restructure the guarantee arrangements.
from Globalstar's 8K, filed 11/20/00:
On November 17, 2000, Globalstar, L.P. ("Globalstar") entered into an
Assignment, Amendment and Release Agreement with the lenders ("Lenders") under
its $500 million credit facility, Loral Space & Communications Ltd. ("Loral"),
Loral Satellite, Inc. ("Loral Satellite") and certain other subsidiaries of
Loral, pursuant to which Globalstar consented to the assignment by the Lenders
to Loral Satellite of all of the loans outstanding under its $500 million credit
facility.
StockHawk |
