Maybe, it's time, for the big boys, to give PLFM a try!
By Mark Weinraub
NEW YORK, June 28 (Reuters) - Globalstar Telecommunications
Ltd. <GSTRF.O> may have drawn down a $250 million bank
facility, a Wall Street research report said on Wednesday,
raising questions once again about the viability of satellite
telephone companies.
Globalstar, which is backed by Loral Space & Communications
Ltd. <LOR.N>, drew down the Chase bank facility set to expire
June 30, C.E. Unterberg, Towbin analyst William Kidd said in a
research report.
"Most thought the facility would expire undrawn in a couple
of days," Kidd said. "We believe that thesis is inaccurate. We
believe Globalstar drew on the facility near June 10."
A Globalstar spokesman declined to comment on the report,
saying the company did not discuss rumors.
He said Globalstar was still comfortable with its previous
statement that it will have a cash shortfall of $160 million
this year, not including its revenues or the Chase facility.
Additionally, the company has "a number of options" to raise
additional funding," the spokesman said.
Satellite telephone companies have been under close
inspection since the collapse earlier this year of $5 billion
Iridium LLC, which was backed by Motorola Inc. <MOT.N> Another
competitor, ICO Global Communications, is fighting to climb out
of bankruptcy.
Questions have been raised about how well a satellite
system works for mobile phones. Customers have complained about
the high cost of the service and the phones, which are bulkier
than the handsets used for traditional cellular service.
Prudential Securities aerospace and defense analyst Todd
Ernst said Loral, which owns about 40 percent of Globalstar,
might be better off using its cash on other projects such as
fixed satellites or broadband instead of Globalstar.
"We do not know if Globalstar is going to succeed or fail,
Ernst said in a telephone interview. "We do know that it is
high-risk."
He added that there might be a conflict of interest between
Loral, which carries an $800 million investment in Globalstar
on its balance sheet plus $500 million in loan guarantees, and
Globalstar, which share some managers.
"What's good for Globalstar might be bad for the
shareholders of Loral," said Ernst, who has a hold rating on
Loral's stock.
Kidd's report said the $250 million from the facility
should allow Globalstar to continue operating until March,
2001. Previously, the company only had enough cash to last
until September.
Kidd, who has a neutral rating on Globalstar's stock, added
that Chase will probably turn to Globalstar's guarantors for
repayment of the facility, including Lockheed Martin <LMT.N>,
which has guaranteed $150 million, and Qualcomm Inc. <QCOM.O>,
which is responsible for $21.9 million.
A provision of Globalstar's deal may force the guarantors
to take three-year Globalstar paper instead of cash, Kidd said.
A spokesman for Lockheed Martin declined to comment. A
representative at Qualcomm, which earlier on Wednesday said it
may see a slide in fourth-quarter chipset orders because of a
drop in handset sales in South Korea, was not immediately
available.
New York-based Globalstar lost $91.9 million, or 98 cents
per common share, in the first quarter of 2000. The company,
which started offering its services earlier this year, had
revenues of $609,000 in the quarter.
Globalstar's shares were up 13/16 to 9-3/16 in afternoon
trading on the Nasdaq stock market. The shares have traded
between 5-13/16 and 53-3/4 in the last year.
Loral was up 1/16 at 7-1/16 on the New York Stock Exchange,
just above its 12-month low of 6-1/8. The shares have traded as
high as 25-11/16 in the past year.
((--Mark Weinraub, New York Equities desk 212-859-1700))
REUTERS
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