PARIS — Mobile satellite services provider Globalstar Inc. has agreed to seek a strategic investor or find some other source of cash as part of the latest agreement it reached with its creditors, led by the French government, Globalstar said July 7.
In exchange for loosening debt covenant deadlines, Globalstar committed to still-stricter spending limits, including limits on capital spending to monetize the company’s radio spectrum.
Globalstar in recent years has made more news trying to monetize its spectrum holdings for a terrestrial service than for its constellation of low-orbiting satellites. That effort, with a view to securing U.S. regulatory approval for a Terrestrial Low Power Service that would use Globalstar’s satellite spectrum, is ongoing.
Jay Monroe steadfast between Globalstar and the abyss
Globalstar has been on a financial tightrope for years and has been repeatedly saved by cash injections from Thermo Funding Co. LLC, which is owned by the family of Globalstar Chairman Jay Monroe.
Monroe’s willingness to place at risk tranche after tranche of its family’s wealth is one of the more compelling stories in the commercial space sector of the past decade — every bit as remarkable, in its way, as SpaceX founder Elon Musk’s use of his private resources to start the launch-service provider 15 years ago.
Thanks to Thermo, and to several investments by the Terrapin Opportunity Fund LP, Globalstar has not fully avoided “events of default” on its debt but has been able to recover in time to maintain operations.
The company has gone through three major debt-modification agreements with its lenders — in 2013, 2015 and the latest, dated June 30 — since the original 2009 agreement.
The most recent agreement, the third major amendment to the original loan made in 2009 by France’s export-credit agency, Coface, Globalstar has until Oct. 30 to raise $147 million in new cash in two stages. This is in addition to the $12 million raised in January from Terrapin.
The first, concluded on June 30, involved the purchase of Thermo of $33 million in restricted shares of Globalstar stock.
The remaining $114 million must be secured by Oct. 30. If Globalstar finds a strategic investor, the new partner must be presented to the creditors by Sept. 30 to confirm the new investor’s bona fides.
Eighty percent of the proceeds raised in the two transactions must be immediately deposited into an account created to repay Globalstar’s creditors.
Globalstar’s creditors are represented by lead bank BNP Paribas backed by BPIFAE, which in 2016 assumed all the business formerly done by Coface.
Globalstar investors look through the satellites to terrestrial play
The sharp end of Globalstar’s business prospects is its spectrum’s potential for conversion to a terrestrial WiFi service. It is the reason Globalstar’s market capitalization remains, even after a nearly 3% selloff on July 7, close to $2 billion.
That’s nearly five times the capitalization of established 50-satellite-fleet owner Intelsat and nearly double that of direct competitor, mobile satellite services provider competitor Iridium, whose $3 billion second-generation constellation is, like Globalstar’s, being financed by France’s BPIFAE export-credit agency.
Thales Alenia Space of France and Italy is prime contractor for both the Globalstar and Iridium second-generation constellations. Globalstar’s French BPIFAE loan guarantee was also due to Globalstar’s selection of Europe’s Arianespace to use four Russian Soyuz rockets to launch the 24 second-generation Globalstar satellites.
The latest debt amendment limits Globalstar to spending no more than the lesser of 80% of whatever equity is raised between 2017 and 2019 or $20 million on spectrum-rights activity.
The creditors have obliged Globalstar to submit regular status reports, called security reviews, to the law firm White & Case LLP, which will be reporting back to the creditors, and to pay $255,000 in cash to the creditors as a “consideration” for the new agreement.
The company also agreed to pay a restructuring fee and an insurance premium totaling $21 million in advance of its Dec. 31, 2017, due date. It must maintain a cash balance of at least $4 million and maintain net debt-to-adjusted-EBITDA ratios as follows in the coming years.
The agreement has not completely shut down Globalstar’s ability to grow its business. For example, under certain conditions the loan arrangement will allow an investment of up to $5 million in Globaltouch West Africa, a long-standing distribution partner for Globalstar services.