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Globalstar SEC Filing Includes a Remote Entity Bankruptcy Option

Globalstar L.P. warned in its annual filing with the U.S. Securities and Exchange Commission (SEC) that its restructuring plan may fail if it conflicts with certain restrictions under existing agreements or if it cannot forge an accord with its creditors and it could then seek bankruptcy protection if it cannot execute a restructuring plan. Globalstar stressed that the warning about bankruptcy was precautionary and the company was not exploring a bankruptcy plan at this time. Globalstar is currently reviewing recommendations for business alternatives presented by financial adviser Blackstone Group.

The company posted a US$3.8 billion loss in 2000. The portion of the loss applicable to the Globalstar Telecommunications Ltd. is US$2.1 billion. The rest of the loss will be recorded as charges by its partners including Loral and Qualcomm. Both Loral and Qualcomm have already recorded related charges. The company has taken a US$ 2.9 billion non-cash charge related to the carrying value of the Globalstar system. Globalstar reported net revenues of US$1.1 million in the fourth quarter and US$3.7 million for the year. The estimated number of mobile and fixed subscribers at the end of 2000 was 30,583. The mobile and fixed subscriber total as of March 18 was 40,009. Globalstar ended the year with about US$197 million in cash, which it believes to be sufficient to continue its operations through 2001.

Globalstar has been the target of at least two class-action lawsuits. The first was filed by bondholders on Feb. 20 alleging that Globalstar violated agreements when it suspended interest payments on bonds. The class action lawsuit on behalf of Globalstar Telecommunications Ltd. shareholders alleges that Globalstar made misstatements or failed to state material facts about the business and its prospects. At least two lawsuits have been filed by individual debt holders against Globalstar. A judge is expected to begin hearing the cases in mid-April.

Globalstar is a partnership that was formed in November 1994 by satellite firm Loral Space & Communications Ltd and cellular telecommunications company Qualcomm Inc. Loral owns about 38 percent of Globalstar L.P. Globalstar Telecommunications Ltd., the public Globalstar entity, owns more than 40 percent of the business. And Qualcomm and several other companies own the remainder.

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