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Microcap & Penny Stocks : Globalstar Telecommunications Limited GSAT -- Ignore unavailable to you. Want to Upgrade?

To: djane who wrote (6435)	8/12/1999 3:45:00 AM
From: djane	Respond to of 29987

GM's Hughes, Others Offer Plan For Rescuing ICO Global System August 12, 1999 By JEFF COLE Staff Reporter of THE WALL STREET JOURNAL Hughes Electronics Corp. and other investors have offered to infuse as much as $600 million into the struggling $4.7 billion ICO Global Communications Ltd. satellite-telephone system, according to executives close to the developments. Hughes, a General Motors Corp. unit based in Los Angeles, holds contracts valued at about $2.5 billion to produce 12 satellites, along with ground systems and handsets, for London-based ICO, the latest victim of waning investor confidence in go-anywhere phone systems. Hughes has already invested $94 million in the project for about a 4% minority ownership stake. Executives said Hughes's investment would "nearly triple" under a new package proposed to ICO's board earlier this week. One executive said Hughes's ownership share will range between 10% and 15%. The package still must be approved by the boards of Hughes and the several other strategic investors involved. Precise details of the rescue plan, including the total added funding and the names of the other investors, weren't available. Spokesmen for Hughes and ICO declined to comment on the new funding proposal. A Hughes spokesman cited past statements by that company suggesting it could increase its ownership role. Abandoned Offering ICO, the only one of four larger proposed or active global-phone projects based outside the U.S., is expected to release some details of the financing package Thursday. The company's board met in Paris Wednesday. ICO's move to find strategic investors comes after the company failed to raise the minimum $500 million sought in a recent public offering of shares. The offering was abandoned July 30, with subscribers' investments returned. That shortfall has been blamed by analysts and some ICO officials partly on this year's financial meltdown by Iridium LLC, a $5 billion system of 66 smaller satellites in lower-earth orbits backed by Motorola Inc. and others. That unraveling has undermined fund-raising efforts at times during the past year for other projects, including the 52-satellite Globalstar Telecommunications Ltd. system backed by Loral Space & Communications Ltd. and the Ellipso system controlled by closely held Mobile Communications Holdings Inc. of Washington. Of the four projects, only ICO involves the use of larger satellites in somewhat higher-altitude orbits. Iridium Fallout Some investors have begun suggesting the larger field of projects has been unfairly tainted by Iridium's failed efforts to attract large volumes of callers, since each system employs different technology, business and marketing strategies. Officials of Hughes and ICO have echoed this sentiment and expressed some hope for success by Globalstar, which plans to begin operations late in September. In ICO's announcement in July, the company said it would offer the strategic investors about $525 million in new Class B shares, plus $75 million in subordinated notes. Warrants for Class A shares also would be offered. In all, Hughes is said to have about $500 million at risk through the investment it already is making to fulfill its contracts with ICO, and that exposure isn't expected to increase under the newly proposed funding package. Hughes's concerns for the ICO project follow a string of other problems with its satellite-manufacturing operations that have plagued the company during the past year. Those problems, including quality-control issues and new federal controls on foreign sales, are expected to cost the company and PanAmSat Corp., its majority-owned provider of satellite communications services, a total of well more than $1 billion in additional expenses, lost revenue, production delays, penalties to customers and other unanticipated outlays. -- Andy Pasztor contributed to this article. Return to top of page \| Format for printing Copyright ¸ 1999 Dow Jones & Company, Inc. All Rights Reserved.