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To: r.edwards who wrote (24322)	7/3/2000 1:17:14 PM
From: Sully-	Respond to of 35685

Monday July 3, 12:37 pm Eastern Time MotleyFool.com - Fool News Is Globalstar Biting the Hand That Feeds It? By Bill Mann Summary: Globalstar unexpectedly grabbed $250 million in revolving credit, leaving its benefactors on the hook for that amount. The company thus tempers a short-term cash crunch, but now must bring in a subscriber base large enough to succeed. This much is sure: Now that Globalstar (Nasdaq: GSTRF - news) has taken the $250 million in credit available to it, the only question is whether people are going to actually buy the company's service. Globalstar has been reported to be having an immediate financing problem, and partial owner Qualcomm (Nasdaq: QCOM - news) has said that it would not provide additional funds to the satellite communications venture. But Qualcomm, along with Loral Space (NYSE: LOR - news) and Lockheed Martin (NYSE: LM - news), among others, guaranteed a credit facility that was set to expire on June 30. In exchange for the initial guarantee, the companies received warrants for Globalstar paper. The $250 million means that, under current cash flow prognostications, Globalstar has enough liquidity to operate through March 2001, external of any revenues. Instead of a $160 million shortfall by year-end, the company will have a projected $90 million left in the bank. Given the continued negative sentiment caused by flameouts by satellite communications providers Iridium and ICO, this is a good thing for Globalstar. It can concentrate on driving subscriber numbers rather than beating a constant funding drive. In other words, though Globalstar sales have been quite anemic, it has nearly a full year's worth of operating cash to prove its business. But at least one of the guarantors of the credit facility, Lockheed Martin, is very unhappy about the form of satisfaction of Globalstar's obligations. In fact, Lockheed's press release headline read "Globalstar Failure to Repay Loan Triggers Lockheed Martin Guarantee Under Bank Credit Agreement." Lockheed states that it and Globalstar have not agreed on a form of repayment to Lockheed, meaning that Lockheed does not consider the pay-in-kind Globalstar notes, which replace the credit line, to be sufficient surety for its cash risk. This lack of confidence from one of the primary backers of the company is not a good sign. Further, the fact that this agreement was not completed in advance to avoid just such a public display of disagreement smacks of more desperation than Globalstar would like to emote. What now? In short, Qualcomm stated previously that it would not contribute additional funds, and it's pretty safe to expect that Lockheed's largesse has dried up. Globalstar is now going to have to prove that its business is a winner. Its first-quarter revenues were just over $600,000. Given that this was essentially the first quarter of operations, this is a poor proxy to extrapolate future growth, but certainly the company's internal return is going to have to be logarithmically higher. But seeing that as recently as June 19 the company was insinuating that it would let the credit facility expire, this could be viewed as a statement that customers were ramping up much slower than expected. Globalstar has always been a huge investment of faith. The short-term cash threat has been allayed; now the company needs to prove to shareholders big and small that it has a product that consumers want to use, and it must do so with no easy access to any more external cash. Your Turn There is an excellent conversation going on at the Globalstar discussion board. Chime in and add your thoughts. biz.yahoo.com