Globalstar LP Senior Unsec Cut To CCC BY S&P
Dow Jones Online News, 08/22/2000 17:19
NEW YORK -(Dow Jones)- Standard & Poor's on Tuesday lowered its corporate credit and senior unsecured debt ratings on Globalstar L.P. to triple-C from single-B-minus. The single-B bank loan rating on the company remains unchanged.
S&P also lowered its corporate credit rating on Globalstar Telecommunications Ltd. (GSTRF) to double-C from triple-C. The double-C rating on Globalstar Telecommunications' preferred stock remains unchanged.
All ratings remain on CreditWatch with negative implications.
S&P said the downgrade is based on the company's continued tight liquidity situation, "and concerns regarding potential covenant violations during the first quarter of 2001, given the slow operational ramp-up of the company's recently launched satellite voice service."
Globalstar launched service in March 2000, and has experienced a number of start-up challenges and faces near-term liquidity issues. At June 30, 2000, the company had about $2.1 billion of debt and $415 million of cash. Based on current operating losses and debt service requirements, the company will need additional financing in early 2001.
Globalstar's $500 million bank facility is fully drawn. One of the financial covenants in the bank facility requires Globalstar to have revenues of $100 million for the 12 month period ending March 31, 2001. However, revenue for the three months ended June 30, 2000, was less than $1 million. Loral Space & Communications Ltd., Globalstar's 40% owner, has provided some limited credit support in the past, however, S&P is not factoring in any additional cash outlays from Loral or Globalstar's other partners. Loral has $500 million of exposure to Globalstar in the form of debt guarantees.
(This story was originally published by Dow Jones Newswires)
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