Globalstar refinancing ends liquidity crisis
WASHINGTON — Globalstar executives on Dec. 2 said the recent refinancing of its $342 million debt and new loans secured with help from EchoStar ensures sufficient cash flow through 2025.
Covington, Louisiana-based Globalstar, which has attempted for the past three years to monetize some of its S-band satellite spectrum by cultivating cellular applications within those airwaves, faced mounting financial pressure as revenues failed to keep pace with loan payments. Globalstar, which lost more than $220 million total between 2016 and 2017, lost just $6.5 million in 2018. While revenue was up slightly for the first nine months of 2019, net income was down as of Sept. 30.
Globalstar, having acknowledged that a spectrum solution was unlikely to materialize in time to cover its debts, sought refinancing as a means to provide long-term financial stability.
On Nov. 26, Globalstar said it borrowed $199 million led by fleet operator EchoStar, which has had a long-term interest in S-band satellite spectrum, and Thermo, Globalstar’s largest shareholder. Rebecca Clary, Globalstar’s chief financial officer, said those proceeds have been used to make three payments towards the company’s French loans, and to negotiate more favorable terms for future payments.
“This refinancing has truly transformed our company, providing us with a fully funded business plan into 2025,” Clary in a Dec. 2 conference call. “We have a clear path to fully paying down the French, and that’s before any cash from spectrum or our growing IoT efforts are included.”
Globalstar finished launching a $1.1 billion constellation of 24 low Earth orbit satellites in 2013 using funds secured through French export credit agency BPI France. The company uses the constellation to provide low-data-rate communications services for tracking devices and, increasingly, Internet of Things sensors used in farming, mining and other industries.
In a news release, Globalstar said it would use its new proceeds to make $152 million in payments towards the French loans, and to pay off a separate $66 million loan from June.
“The completion of this financing is an important inflection point for the company, as it secures our liquidity position for many years ahead,” Globalstar CEO Dave Kagan said. “I know it took longer than anyone wanted, but we made sure that it was done correctly, and that it was the best deal available to our shareholders.”
Clary said Thermo agreed to convert a 2009 loan into stock, freeing Globalstar from $131 million it still owed, of which $87.5 million was interest payments, according to a Nov. 12 filing with the U.S. Securities and Exchange Commission.
“The company has never before had such a strong balance sheet,” Kagan said.
Kagan said Globalstar is poised to benefit from having EchoStar as a “strategic partner” that “fully believes in Globalstar’s future and in the value of our assets.”
Jay Monroe, executive chairman of Globalstar’s board of directors and Thermo’s majority owner, said Globalstar’s second-generation ground infrastructure was designed with EchoStar’s Hughes Network Systems division, which created an opportunity to discuss further collaboration.
“On a global basis, there are a lot of areas of intersection between EchoStar and Globalstar,” Monroe said. He highlighted joint capabilities between EchoStar’s geosynchronous satellites and Globalstar’s LEO satellites as an area of study.
“We are very interested in developing those concepts with them, and there are a lot of discussions that have been going on for the last year or so about how that might work,” Monroe said.
EchoStar recently ordered two smallsats from Tyvak Nano-Satellite Systems in an effort to secure global S-band spectrum.
Monroe said Globalstar has had global S-band spectrum since the 1990s, but that Globalstar and EchoStar haven’t committed to anything new regarding their satellite systems at this point.
Monroe said Globalstar, as a low-data-rate service provider, is not threatened by broadband megaconstellation ventures like OneWeb, Amazon and SpaceX since those are designed around higher frequencies for higher speed connections. Left unaddressed was how Globalstar plans to compete with more than a dozen startups deploying cubesats for Internet of Things services, several of which have launched at least one satellite, with plans for dozens more.