S&P Rates Globalstar Mixed Shelf Prelim B/CCC+/CC
Monday September 20, 3:05 pm Eastern Time
Company Press Release
NEW YORK--(BUSINESS WIRE)--Standard & Poor's--Sept. 20, 1999-- Standard &
Poor's today assigned its preliminary single-'B' senior unsecured debt, preliminary
triple-'C'-plus subordinated debt and preliminary double-'C' preferred stock ratings to the
debt securities to be issued under a $500 million mixed shelf registration by Globalstar Telecommunications Ltd. (GTL),
Globalstar, L.P. and Globalstar Capital Corp.
The ratings are placed on CreditWatch with negative implications.
The senior unsecured debt and subordinated debt of the mixed shelf can only be co-issued by Globalstar L.P./Globalstar
Capital Corp., and the preferred stock can only be issued by GTL.
The triple-'C'-plus corporate credit and double-'C' preferred stock ratings on GTL remain on CreditWatch with negative
implications.
The single-'B' corporate credit and senior unsecured debt ratings and the single-'B'-plus bank loan rating on Globalstar
L.P./Globalstar Capital Corp. also remain on CreditWatch with negative implications.
GTL is a general partner of Globalstar L.P. GTL's only asset is its 36.3% interest in Globalstar L.P., which is expected to have
a low-earth orbit satellite-based telecommunications network in commercial operation in October 1999.
Proceeds of the mixed shelf registration may be used by Globalstar L.P./Globalstar Capital Corp. for debt refinancing or for
general corporate purposes. GTL intends to use the proceeds of its securities to purchase preferred stock in Globalstar L.P. As
of June 30, 1999, total debt outstanding for Globalstar L.P. was about $1.8 billion.
GTL's ratings reflect the high degree of business and financial risk associated with its dependence on a start-up business
(Globalstar L.P.) in the near term. In addition, uncertainty as to the market value of Globalstar L.P.'s common stock and cash
flows from Globalstar L.P., which can be used to service GTL's preferred stock, heightens GTL's financial risk in the near term.
Therefore, the corporate credit rating on GTL is two notches lower than the corporate credit rating on Globalstar L.P.
Globalstar L.P.'s rating reflects risks associated with launching satellites, the start-up nature of its operations and current lack of
internal cash generation. The rating benefits somewhat from the company's strong base of strategic partners.
The Globalstar system should enable local service providers, which include Globalstar L.P.'s strategic partners, to offer wireless
voice telephony and data services to areas of the world that currently lack basic telephony and to enhance telecommunications
to areas underserved or not served by cellular telephone.
Total cost of the 52 satellite Globalstar system, which includes four spares, prior to commercial operation is anticipated to be
about $3.7 billion. The company's business plan is funded until operations turn cash flow positive in 2000. To date, 36 satellites
have been launched, which are expected to be sufficient for commercial operation.
Commercial operation by Globalstar L.P.'s service providers is expected to occur in October 1999. Resolution of the
CreditWatch is dependent on the successful execution of Globalstar L.P.'s business plan, Standard & Poor's said.--CreditWire
Contact:
Rosemarie Kalinowski, New York, 212/438-7841
Related News Categories: banking, telecom
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