PARIS—Mobile satellite services provider Globalstar Inc. has been spared a portion of what is still likely to be a challenging cash call in 2015 following the agreement by ground-network provider Hughes to take payment in Globalstar stock, Globalstar said May 8.
Under the agreement, which Globalstar said was struck in April, Germantown, Maryland-based Hughes Network Systems, owned by EchoStar Corp. of Englewood, Colorado, has agreed to take 95 percent of its $16.3 million Globalstar contract payment in stock to be discounted by 7 percent.
A separate agreement by ground network-interface provider Ericsson waiving milestone payment deadlines will also give Covington, Louisiana-based Globalstar some badly needed breathing room, Globalstar said in a May 8 filling with the U.S. Securities and Exchange Commission.
In a May 7 conference call with investors, Globalstar Chief Financial Officer Rebecca Clary said the company owes $3 million in June and another $3 million in January in reimbursements of its loan backed by France’s Coface export-credit agency.
The Coface loan helped finance the construction of 24 second-generation Globalstar satellites, now all in low Earth orbit, and their launches by the France-based Arianespace launch consortium.
Added to these payments will be $19 million Globalstar owes in the coming year – to March 31, 2016 – in interest on other debt.
Under the terms of its Coface-backed loan, Globalstar began making semi-annual payments last December. The question since then has been whether the company’s operating cash flow from voice and data subscribers and related equipment sales would be enough to repay its loans and build out the Hughes- and Ericsson-provided ground infrastructure.
Clary said that as of March 31, Globalstar had $13.7 million in cash, plus $14 million remaining from a $24 million convertible loan from the Terrapin Opportunity LP investment fund. The company also had, as required, about $38 million in an escrow account that must be maintained at that level under the terms of its Coface loan.
In its SEC filing, Globalstar said the Coface-affiliated lenders recently notified the company that it was not in compliance with one of the financial covenants for the period ending last Dec. 31. Globalstar said it disagreed and that discussions were underway. The company did not disclose the nature of the disagreement. In the past, Globalstar has resolved loan-covenant breaches by raising new equity, often from Thermo Capital Partners LLC, and more recently from Terrapin.
Globalstar Chief Executive Jay Monroe, who owns Thermo and is Globalstar’s principal owner, said during the call that the ground infrastructure is indispensable to generating the higher data throughput and other features advertised as key second-generation enhancements.
Monroe said that for U.S. subscribers, Globalstar’s main market for now, the Hughes and Ericsson work should be about finished by the end of this year. Outside of North America, where Globalstar sees its biggest growth potential, the ground network will be ready starting in late 2016, Monroe said. Data throughput will be up to 25 times faster than the current network can support, he said.
The company is also debuting later this year a new-generation two-way Spot locator, whose current subscriber base for the one-way service totals 243,500. Spot subscribers paid an average $10.29 per month for the service in the first three months of 2015, the company said.
Globalstar’s main revenue potential remains the Duplex two-way voice service, which the company said shows signs of taking off in Central and South America, with Africa and Asia to follow.
Duplex revenue was $6.2 million for the three months ending March 31, up just 5 percent from a year ago, and the subscriber count was down 4 percent, to 68,500.
The lower subscriber base was partly offset by a 9 percent increase, to $30, in average monthly subscriber revenue, a figure that Clary said would be closer to $33.70 per month after accounting for Globalstar’s 2014 cleansing of its subscriber count to eject some 26,000 non-paying customers.