Globalstar Issues Statement On Future Funding Requirements

Globalstar has denied recent reports that the company may be on the brink of bankruptcy. Rumors have been circulating within the investment community to the effect that usage of the system was growing far slower than predicted, and that the company was short of money and encountering difficulties finding capital to remain in business. Globalstar is being closely watched by analysts in the aerospace and telecommunication industries because of the recent bankruptcies by both Iridium and ICO. The company has been looking at options to raise up to US$160 million by the end of the year, but does not acknowledge any urgency in its fundraising efforts 

Globalstar issued a statement to clarify its future funding requirements. “Globalstar has been consistently open and candid with the investment community regarding its funding requirements. We have previously reported that Globalstar has sufficient funds on hand to continue the deployment of the Globalstar system and that we will most probably require additional funding in the September/October time frame. At that time we expect to be in a more favorable position due to stronger evidence of deployment progress. We are confident in our ability to raise funding as required to meet Globalstar's needs and at the appropriate time will consider several options available to us including support from our partners. Globalstar, with substantial participation from its partners, has raised US$4 billion for system development and deployment. They are aware of our funding requirements and have indicated intentions to support the project to its successful conclusion. We see no need to accelerate our timetable, and thus, to date, no plan has been submitted to our partners or to anyone else. Reports that requests for additional funding have been made and rejected are inaccurate.”

The company has previously stated that, without giving effect to any revenue and assuming that a US$250 million bank credit is allowed to expire at the end of June 2000, Globalstar will need a maximum of US$160 million by year-end 2000, an amount which will be offset by revenues received to that point. The company, which reports minutes of use and revenue on a quarterly basis, noted that while the roll-out of service has been slower than expected, recent activity continues to provide positive evidence of a steady build-up. Usage continues to increase weekly and service providers remain confident that Globalstar will succeed in penetrating its selected markets.
  

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