What are Globalstar’s available sources of liquidity?

Posted in Financials, Globalstar at 11:08 am by timfarrar

On Monday, March 16, Globalstar filed an NT-10K, stating that it was “unable to file its Annual Report on Form 10-K for the year ended December 31, 2008 within the prescribed time period…because certain information regarding its available sources of liquidity is not available at this time and may materially affect the disclosure to be contained in the Annual Report”. We’ll see in the next two weeks what this information turns out to be, but it’s not surprising that Globalstar’s sources of liquidity are of significant concern to the company, given that it needs to raise substantial additional funds in the next few months to complete construction and launch of its first six second generation satellites later this summer.

As of September 2008, Globalstar expected to need about $260M (at today’s exchange rates) in the following 12 months to meet existing contractual obligations (excluding satellite insurance and any operating losses), and only had $100M of available liquidity including the escrow account, although since that time, Thermo has injected a further $50M into the company. This leaves Globalstar needing to raise perhaps $150M to meet all of its obligations over the next six months, assuming the escrow account is drawn down significantly (but not to zero) during that time and that it is unable to defer any of the payments that are coming due.

In our view there are three obvious potential sources of liquidity which could cover some or all of this funding requirement:
1) Further injections of capital from Thermo Capital (run by Jay Monroe, the company’s CEO), in addition to the $450M or so already invested in the company
2) Access to the restricted funds in the satellite construction escrow account with Thales Alenia Space, which Globalstar indicated last November it may seek to access if Thales Alenia agreed to this
3) One or more new strategic investors, through some partnership to exploit Globalstar’s satellite and spectrum assets.
A possible fourth option, securing new financial investors, seems less likely to materialize, given that investors in the convertible bond issue last year have not fared well, and the current economic climate makes it very difficult for almost everyone to raise money.

We’re therefore waiting with bated breath to see what happens with the eventual 10-K filing and whether Globalstar continues to defy the skeptics and secure the necessary additional liquidity. Most intriguing is the possibility that a new strategic investor will emerge, although its hard to guess where such a partner might come from. Perhaps Satellite 2009 next week will provide the catalyst for a major announcement by Globalstar?

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