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Globalstar
SEC Filing Includes a Remote Bankruptcy Option
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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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