Globalstar Resets Launch Campaign as Financing, Regulatory Deadlines Loom

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PARIS — Mobile communications satellite operator Globalstar on May 5 sought to reassure investors that a component failure aboard one of the six identical satellites launched last October will not recur on the other spacecraft and that the launch of the next 18 satellites should proceed starting in July.

But the company conceded it was facing deadlines to finance the ground segment planned to permit the spacecraft to work to full advantage, and other time limits on securing a permanent U.S. license to operate its second-generation constellation.

Globalstar Chairman Jay Monroe said in a May 5 interview that the company scrapped a planned May launch of a second batch of six second-generation satellites following the in-orbit failure of a momentum wheel on a satellite launched in October.

Momentum wheels maintain a satellite in stable position in orbit. Each 700-kilogram Globalstar second-generation spacecraft is equipped with four momentum wheels, but needs only three to function.

Monroe said the satellite in question is working well. After several weeks spent checking the manufacturing and testing history on the momentum wheels built for all 24 second-generation Globalstar spacecraft, the company has concluded that the defect is limited to the single wheel.

“We have identified what we think the problem is and it relates to assembly and testing. The problem is understood and at the moment we do not believe we will have issues on other satellites,” Monroe said. He said the suspect assembly and testing procedures were used on other momentum wheels, but that as chance would have it, all the others are still on the ground awaiting launch.

Thales Alenia Space of France and Italy is prime contractor for the 24 second-generation Globalstar satellites. Goodrich Corp. of Charlotte, N.C., provides the satellites’ momentum wheels.

Discovery of the problem in orbit in early April obliged Covington, La.-based Globalstar to halt plans for a mid-May launch of a second six-satellite batch of satellites aboard a Russian Soyuz rocket operated from the Russian-run Baikonur Cosmodrome in Kazakhstan.

The launch is being handled through Europe’s launch consortium, Arianespace of Evry, France, though the Franco-Russian Starsem joint venture in which Arianespace is a shareholder.

Monroe said the launch has been rescheduled for mid-July, which should give Arianespace and Starsem enough time to launch two more groups of six satellites by the end of the year. An Arianespace official on May 5 confirmed this schedule.

Monroe said there are no debt covenants or regulatory requirements that would penalize Globalstar if the last launch slipped into early 2012.

In a May 5 filing with the U.S. Securities and Exchange Commission (SEC), Globalstar said it is nonetheless facing pressure on both the financial and regulatory fronts.

On the financial side, the company has already renegotiated its payment schedule with ground system providers Hughes Communications and Oceus Networks, the former Ericsson Federal Inc. The larger contract, with Germantown, Md.-based Hughes, has been rewritten to permit Globalstar to withhold payments until July 31. After that, Hughes will demand interest payments of 10 percent a year on the outstanding funds. Oceus has negotiated similar terms.

With Thales Alenia Space, Globalstar has negotiated an overall contract for 48 satellites, with a series of loans and the manufacturer’s current development work covering only the first 24 satellites. In a May 5 conference call, Globalstar Chief Executive Peter Dalton said one of the company’s top priorities is to come to terms with Thales Alenia Space on construction of more spacecraft.

In the SEC filing, Globalstar said it has opened negotiations with Thales Alenia Space to seek more-favorable contract terms for the follow-on satellites. The Franco-Italian manufacturer has already procured long-lead items for six additional spacecraft beyond the 24 covered by the existing contract, and these parts have been placed into storage.

On the regulatory side, Globalstar is facing a problem that Monroe said no one was aware of until relatively recently.

Unlike the first-generation Globalstar constellation, which was registered in the United States, the second-generation satellites are registered in France. France is home not only to Thales Alenia Space but also to the French export-credit agency, Coface, which is backing Globalstar’s bank loans.

To be able to operate the second-generation satellite service in the United States, Globalstar must have France register the system with the U.N. under the U.N. Outer Space Treaty and the Convention on Registration of Objects in Outer Space.

Monroe said this U.S. requirement had escaped the attention of everyone involved. The result is that even now, several months after the first six second-generation satellites were declared operational, Globalstar cannot use them to serve U.S. customers. Because of coverage overlaps with Globalstar’s ground stations, the prohibition concerns Canada and Mexico as well.

In its SEC filing, Globalstar said it received U.S. regulatory approval on March 18 for the second-generation system pending U.N. registration. On March 24, it said, it filed an application to French regulators for the system. The French side then returned with requests for additional information, which Globalstar said it provided April 27.

Monroe said French regulators have now received all the information they need to process the application and file the necessary documents with the U.N. The SEC document does not address why the initial application in France was not filed until March 24. Barbee Ponder, Globalstar’s general counsel and vice president of regulatory affairs, said in a May 6 statement:

“The licensing process involved discussions with the U.S. and French regulators regarding which country would register the second-generation satellites. Globalstar decided to pursue registration with France and, thus, made the initial filing on March 24.”

Monroe said he believes the French registration with the U.N. will occur in July.

In addition to preventing Globalstar from serving its most important market -– the United States -– with full two-way voice and data communications, the delay in registration is of concern to Globalstar’s creditors. The Coface-backed loan requires the company to have a permanent U.S. license by Aug. 31 or risk a default. The loan also requires Globalstar to have completed in-orbit acceptance of 18 of its second-generation satellites by Jan. 1, 2012, or all 24 satellites by Sept. 1, 2012.