PARIS — Satellite builder Thales Alenia Space has agreed to waive two-thirds of an arbitration award it won against customer Globalstar if the two companies sign a $200 million contract for six new Globalstar satellites by Feb. 28, Globalstar announced June 28.

The agreement was reached just hours before a June 23 deadline that would have permitted Thales Alenia Space to lay down its tools and stop final work on six nearly completed Globalstar mobile communications satellites scheduled for launch this autumn.

Covington, La.-based Globalstar must raise additional cash, and agree to other terms, before Thales Alenia Space will sign the contract for six new satellites, Globalstar said in a filing with the U.S. Securities and Exchange Commission (SEC).

Once the funds are raised and the other conditions are met, the two companies will sign a contract for six new spacecraft for a total cost of 150 million euros ($200 million), or 25 million euros per satellite.

Globalstar had asked an American Arbitration Association panel to force Cannes, France-based Thales Alenia Space to build at least six new satellites at prices from an earlier contract. The panel ruled against Globalstar, saying the previous contract was no longer in force, and also ruled that Globalstar owed Thales Alenia Space 53 million euros ($69 million) in contract termination fees.

Under the terms of Globalstar’s financing backed by the French export-credit agency, Coface, Thales Alenia Space was obligated to inform Coface of the arbitration award. That notification, on May 23, set in motion a 30-day countdown at the end of which Globalstar would have been forced to pay the award or stand by and watch Thales Alenia Space stop work on the six nearly completed satellites.

Globalstar said that this scenario, if it played out, would force the company to consider strategic alternatives including filing for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.

The agreement detailed in the June 28 SEC filing suggests that Thales Alenia Space, which has already built 18 second-generation Globalstar satellites and is finishing six more, sees its greater interest in nursing Globalstar along instead of trying to extract an arbitration award that, given Globalstar’s cash position, would be difficult to secure.

Industry officials had speculated that a de facto payment of the arbitration award, or a portion of it, would be embedded in any new contract between Thales Alenia Space and Globalstar. Both companies declined to comment on their new relationship.

One industry official said the two companies’ agreement to suspend a proceeding in a U.S. District Court to collect the arbitration award until July 16 did not stop the Coface countdown. This could have led the export-credit agency to find Globalstar in default on its Coface-backed financing agreement and forced a stop-work order by Thales Alenia Space.

The six satellites in final preparation at Thales Alenia Space’s Rome facility are the last of 24 that Globalstar ordered with the Coface-backed bank loan. The lenders had said they would consider financing a second batch of 24 satellites only after Globalstar had proved its business case with the first batch.

Globalstar has agreed to pay one-third of the arbitration award once it secures the needed funding for the six new satellites and signs the new construction contract. Globalstar said the new contract would be payable over a three-year period once manufacturing begins.

Thales Alenia Space officials say they have analyzed the Globalstar constellation and have concluded, as has Globalstar, that the company’s business plan could be realized with 30 satellites in orbit, not the 48 originally ordered.

A successful Globalstar, they said, could be only six new satellites away. Globalstar’s success is in the satellite builder’s interests, which is why it has continued to work with Globalstar despite the occasionally strained relations between the manufacturer and the customer — especially after Globalstar instigated the arbitration process.


Thales Alenia Commits To Resolving Globalstar Contract Impasse

Peter B. de Selding was the Paris bureau chief for SpaceNews.