Globalstar, Inc. (OTCBB:GSAT), a provider of mobile satellite voice and data services, announced today it has successfully completed and reached agreements to complete multi-part financings in connection with the successful exchange (the “Exchange”) of its 5.75 percent Convertible Senior Unsecured Notes (“5.75 percent Notes”) into new 8.00 percent Senior Unsecured Convertible Notes (“8.00 percent Notes”). In addition to the Exchange, Globalstar also entered into an agreement with Thermo and its French bank group providing $25 million of initial equity from Thermo to complete the Exchange. The agreement also establishes the principal terms of an amendment to the 2009 COFACE Facility Agreement that, among other adjustments, upon closing would materially improve the debt amortization and related financial covenant schedules and provides for an incremental $60 million of funding and funding backstop from Thermo, up to $20 million of which could be injected even prior to the anticipated closing on the facility amendment.
Once implemented, these agreements eliminate financial uncertainties, materially reduce debt amortization requirements through 2019 and provide the capital required, which, when combined with anticipated internally generated cash flow and the $30 million Terrapin equity line announced in December 2012, are expected to facilitate a fully funded long-term business plan. Details of the agreements and financings include:
—The Exchange, with a 91 percent participation rate, provided for the exchange of $65.6 million of 5.75 percent Notes for $54.6 million of 8.00 percent Notes, plus cash and equity. The initial conversion price on the 8.00 percent Notes is $0.80, which price is subject to customary anti-dilution and other protections.
—An agreement with senior lenders and approval of the French government under the 2009 COFACE Facility Agreement to approve the Exchange. This agreement also sets forth the principal terms of a facility amendment that, when completed, will defer and reduce near term repayment obligations and reset all financial covenants, among other terms.
—The agreement also provided for Thermo’s completion of an investment of $25 million of equity capital before the close of the Exchange, and sets the terms for an incremental backstop equal to $60 million of additional capital through 2014. Thermo invested $5 million of the $60 million, in addition to the $25 million required, in connection with the closing of today’s transactions. The backstop will be reduced to the extent Globalstar raises capital from 3rd party investors.
Jay Monroe, Chairman and CEO of Globalstar, Inc. stated, “We could not be more thrilled to have completed the Exchange and to reach an agreement to amend the COFACE Facility Agreement. Not only will the amendment materially improve our debt amortization schedule, postponing an aggregate $235 million in principal payments through 2019, but the parties have also provided for a significant financing backstop by Thermo that will bolster the Company’s long-term liquidity resources including a cash cushion and a fully funded business plan, according to our current projections. While the Exchange and the initial financings are complete, we anticipate closing the amendment as soon as possible. Most importantly, we have cleared the way for Globalstar to focus purely upon operational execution. Solving the Company’s liquidity related issues enables management to devote all of our energies to the pursuit and capture of significant growth and spectrum asset opportunities afforded by the restoration of our Duplex service.”
Mr. Monroe concluded, “All of the pieces of the puzzle are finally in place—our second-generation constellation is fully launched, Duplex revenue growth is starting to accelerate, customers are being rewarded for their loyalty as service levels have significantly improved, and we are launching five new products during 2013 that demonstrate our commitment to the commercial and consumer MSS markets. Upon closing of the amendment, we will have the financial flexibility necessary for the realization of our significant strategic and operational opportunities. We extend our gratitude to the exchanging convertible note holders, our dedicated senior French bank group and the French authorities who have worked tirelessly on the accomplishment of this colossal feat. This is an exciting time for Globalstar.”
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