Globalstar Drew Down $250 Million Credit Facility, Analyst Says

Communications Today, June 29, 2000

Financially struggling Globalstar L.P. [GSTRF] may have enough cash to last another six months if it withdrew a $250 million line of credit from Chase Manhattan Bank earlier this month.

That is the view of C.E. Unterberg, Towbin's satellite research team, led by William Kidd, who issued a report yesterday claiming that financial community sources believe that the credit facility was tapped within the past couple of weeks. Mac Jeffery, a spokesman for Loral Space and Communications [LOR], told us June 16 that Globalstar had not draw on the credit line, but Jeffery declined to provide an update in a follow-up phone call at 5:45 p.m.

"The answer to the question today is that reports on whether we have drawn the credit facility down are purely speculative and we don't comment on speculation," Jeffery said.

The C.E. Unterberg, Towbin report explained that drawing down the credit facility before it expires Friday would require the guarantors of the debt to cover the liability. The primary guarantor is Lockheed Martin Corp., which would cover $206.3 million, according to C.E. Unterberg. Lockheed Martin owns roughly 13 percent of Loral, stemming from the prior sale of Loral business units to Lockheed Martin.

"If available, $250 million in liquidity would extend the company's [Globalstar's] cash life by six months to March 2001 from September 2000," according to the C.E. Unterberg, Towbin report.

C.E. Unterberg, Towbin analysts also said they doubted Globalstar would make a bankruptcy court filing anytime soon, despite continuing reports of slow sales of its global, satellite phone service.

"Because Globalstar has the sure ability to operate until September in its current state, it would seem foolhardy to now let a bankruptcy court decide whether to let Globalstar have use of cash collateral, albeit $400-plus million including the draw, or face liquidation if creditors are not supportive," the C.E. Unterberg report said.

Paul Dykewicz