WSJ's story on G* funding news release.
June 20, 2000
Globalstar Declares Its Ability
To Raise Much-Needed Cash
By ANDY PASZTOR
Staff Reporter of THE WALL STREET JOURNAL
Globalstar Telecommunications LP, seeking to counter Wall Street's concerns
about an impending cash crisis, said management is "confident" it will be able
to raise the necessary funds this year to continue the satellite-telephone
venture.
Issued after a spate of media reports and speculation by industry officials and
analysts that the San Jose, Calif., company could run out of operating funds as
early as the fall, Monday's announcement sought to calm such escalating fears
without disclosing specifics about the sources of the anticipated cash infusion.
"We are confident in our ability to raise funding
as required," including "support from our
partners" and other options, said Bernard L.
Schwartz, Globalstar's chairman and chief
executive. The partners have "indicated intentions
to support the project to its successful
conclusion," Mr. Schwartz said.
The Shadow of Iridium
The shadow of two ill-fated satellite phone systems -- Iridium LLC and ICO
Global Communications Ltd. -- continues to haunt Globalstar, because those
projects suffered much-publicized collapses.
The unusual statement, which blasted some reports on the company's negative
cash outlook as "inaccurate," said Globalstar hasn't altered its deployment plans
and will consider its options at "the appropriate time."
Globalstar's stock price has dropped nearly 90% since the beginning of the
year, with particularly sharp declines since the global telephone service was
launched commercially in the spring.
Recently, a number of industry observers expressed new doubts about
Globalstar's long-term prospects, citing heavy start-up costs, decisions by
many institutional investors to sell their holdings in the company and a $250
million line of bank credit that will expire at the end of the month, unless it is
renegotiated.
At the end of March, Globalstar had $235 million cash on hand, according to a
Securities and Exchange Commission filing. The filing said the company
expected to spend about $180 million through year end to complete and
enhance the system, while expenses for interest, operations, marketing and
general administration totaled more than $122 million for the first quarter alone,
ended March 31.
Maximum of $160 Million
While acknowledging that subscription growth "has been slower than
expected" and that Globalstar may need "a maximum of $160 million" more by
year end, Mr. Schwartz denied "reports that requests for additional funding
have been made and rejected."
Since reporting a $208.6 million first-quarter loss in May, company officials
have declined to provide details about additional subscribers.
They stuck to that pattern yesterday, saying that "recent activity continues to
provide positive evidence of a steady build-up" of customers and stressing that
they expect to show "stronger evidence of deployment progress" by October.
As chairman of Loral Space & Communications Ltd., the New York satellite
maker and services provider that founded and controls Globalstar, Mr.
Schwartz has pledged that Loral won't sacrifice itself to bail out Globalstar.
Write to Andy Pasztor at andy.pasztor@wsj.com
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