WASHINGTON
— Globalstar’s $574 million credit backing from the French government’s export credit agency was attacked as a disguised subsidy by Globalstar’s mobile satellite service competitors, who also said they envied the deal.
Andrew Sukawaty, chief executive of London-based Inmarsat, a Globalstar competitor, said the Globalstar loan guarantee by
France
‘s Coface, which carries an interest rate of just 6.3 percent, is a mouth-watering financial deal that cannot be compared to a simple bank loan.
“You’ve got a company with little revenues or cash flow and it got a better credit rating than even an FSS [fixed satellite services] operator could get,” Sukawaty said March 26 at the Satellite 2009 conference.
FSS satellite fleet operators are huge generators of cash and many of them are very profitable. “Not to call this [Coface] deal a propping up or a subsidy is a bit cheeky.”
Globalstar
Chief Executive Jay Monroe said the Coface deal, announced March 25, was “extremely difficult” to negotiate and took a long time to conclude. “When you juxtapose [the terms] with the current credit crisis, it was very logical for us to take it. The outcome was a seminal event for Globalstar.”
The Coface loan guarantee was committed on the condition that Globalstar’s principal financial backer – the Monroe-controlled Thermo Funding Co. LLC – purchases an additional $100 million in Globalstar equity.
Monroe
said March 26 that this additional funding has been committed, and will be provided either solely by Thermo or with Thermo in partnership with another company. In either event, he said, the funding has been committed.
Matt Desch, chief executive of Bethesda, Md.-based Iridium Satellite LLC, a Globalstar competitor that is trying to raise financing for its own second-generation system, said the Coface loan “makes a lot look possible.”
Desch
said Iridium has sufficient cash flow now so that it would be difficult to demonstrate the level of financial need that might be necessary to get this kind of loan. The Coface-backed bank facility is being managed by a consortium of mainly French banks including BNP Paribas, Natixis and SocieteGenerale.
Milpitas, Calif.-based Globalstar is building a second-generation constellation of 48 satellites whose manufacturer, ThalesAlenia Space, and launch services provider, Arianespace, are both based in
France
. The volume of work on the constellation that will be performed in
France
has been key to unlocking the Coface support.
Thales
Alenia Space is expected to begin delivering Globalstar satellites late this year, with launches to occur aboard Russian Soyuz rockets from the BaikonurCosmodrome in
Kazakhstan
, also starting late this year.
The Soyuz launches were booked through Arianespace and the Arianespace affiliate, Starsem of Paris.
Michael Corkery, acting chief executive of ICO Global Communications, which will need to raise substantial financing later this year, said the company’s current bank notes carry an interest rate of about 8.5 percent. “Being able to take that down by 25 percent is certainly something that we’d like to do,” Corkery said.
Jeffrey Epstein, president of TerreStar Networks of Reston, Va., which is launching its first satellite later this year and will need financing in 2010, said the Globalstar loan rate “is fantastic” and beats even the terms that TerreStar got from its lenders in 2007, when lending terms were much more favorable. “If I could get a credit facility like this, I would take it,” Epstein said.
