GLOBALSTAR TELECOMMUNICATIONS LTD
Form: 10-Q Filing Date: 5/15/2000
Effective January 1, 2000, Globalstar commenced commercial operations and
as of March 31, 2000, 25 countries were in full service, served by 11 gateways.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents, including restricted cash, increased from $173.9
million at December 31, 1999 to $234.7 million at March 31, 2000. The net
increase is primarily the result of the net proceeds from the sale of
Globalstar's ordinary partnership interests of $270.4 million, partially offset
by the net expenditures for the Globalstar System of $49.3 million, net cash
used in operating activities of $105.3 million, net expenditures for production
gateways and user terminals of $11.4 million, and net expenditures for
additional spare satellites of $35.6 million.
As of March 31, 2000, all 52 Globalstar satellites, including four in-orbit
spares, have been launched and are being used to test system functionality, to
support service provider friendly user trials, and to provide commercial
service. Globalstar has secured from SS/L twelve and eighteen month call up
orders for two additional Delta launch vehicles in the event additional spare
satellites are required. The total future commitment for these launch vehicles
is approximately $82 million plus escalation of 3% per year. If these launch
vehicles are not used by year end 2003, Globalstar will incur a termination
charge of approximately $16.0 million.
From April 1, 2000 through December 31, 2000, Globalstar expects to spend
approximately $180 million, for the enhancement of its system software, for the
eight spare satellites being constructed by SS/L, for development work completed
but not paid at March 31, 2000, and for the net financing provided to
Globalstar's service providers to assist in the purchase of gateways, fixed
access terminals and handsets (which includes expected receipts of $181 million
from the service providers as repayment of such financing). In addition, cash interest, preferred dividends and operating costs are expected to
be approximately $125 million per quarter in 2000. Globalstar believes that, its
cash on hand ($235 million at March 31, 2000), remaining available credit as of
March 31, 2000 of approximately $410 million, under its $250 million and $500
million credit agreements and vendor financing arrangements, will be sufficient
to cover its expected cash outflows for 2000. If Globalstar does not negotiate
reinstatement of the December 30, 2000 maturity date of its $250 million credit
facility and if revenues are less than $160 million in 2000, Globalstar believes
that it will require additional funds to the extent revenue falls short of $160
million. While Globalstar believes it will be able to obtain the additional
funds, there can be no assurance, however, that such funds will be available on
favorable terms or on a timely basis, if at all.
In May 2000, Globalstar finalized $531.1 million of vendor financing
arrangements with Qualcomm that replaces the previous $100 million vendor
financing agreement. The vendor financing bears interest at 6%, matures on
August 15, 2003 and requires repayment pro rata with the term loans under
Globalstar's $500 million credit facility. As of May 5, 2000, $482 million was
outstanding under this facility. In connection with this agreement, Qualcomm
received warrants to purchase 3,450,000 Globalstar partnership interests at an
exercise price of $42.25 per interest. The exercise price was determined by
reference to the fair market value of GTL's common stock on the closing date of
the vendor financing, based on an approximate one partnership interest for four
shares of GTL common stock. Fifty percent of the warrants vested on the closing
date. The remaining 50% will vest generally in two equal installments on
September 1, 2000 and September 1, 2001. The warrants will expire in 2007.
Loral has agreed that if the principal amount (excluding capitalized
interest, currently amounting to $31.1 million) outstanding under the Qualcomm
vendor financing facility exceeds the principal amount outstanding under
Globalstar's $500 million credit facility, as determined on certain measurement
dates, then Loral will guarantee 50% of such excess amount. As a result, Loral's
aggregate guarantee liability for debt outstanding under the Qualcomm vendor
financing facility and Globalstar's credit facility will not exceed $500
million.
From
freeedgar.com |
