LONDON Satellite network operator Globalstar has been forced to restart discussions with potential investors after its creditors on Thursday (Jan. 30) rejected a proposed rescue operation led by New Valley Corp.
The $55 million deal put together three weeks ago by New Valley, would have given the Miami-based investor group a controlling stake in Globalstar (San Jose, Calif.), but was rejected by the company's creditors as not being high enough. The original investors and bondholders are believed to have invested $4 billion to establish the satellite-based mobile phone operator.
Globalstar said in the short term members of its creditors committee would provide it with $12 million in debtor-in-possession financing, giving it more time to talk to other investors.
Globalstar has a cash-burn rate of about $4 million a month, so a $12 million investment would give it an extra three months of funding. The company declined to comment on which creditors agreed to provide the funding but said it is confident another restructuring plan would be developed.
It is understood that some of Globalstar's leading backers, including Loral Space and Communications and Qualcomm, balked at the amount being offered by New Valley. The creditors believe prospects for the operation, which now remains in Chapter 11, could improve following the Federal Communications Commission's decision that it would allow satellite providers to combine wireless and terrestrial mobile services.
However, it is not clear just how big an impact the FCC's ruling would have for mobile satellite operators, another of which, Iridium, also faces huge financial difficulties.
The New Valley proposal would have included $20 million in debtor-in-possession financing and an additional $35 million in financing if the transaction was approved by the Delaware bankruptcy court overseeing Globalstar's reorganization.
Globalstar has 52 satellites in orbit, including four spares, and operates in 100 countries, serving over 83,000 subscribers.
The operator plans to accelerate its program of new product development and service offerings in the months ahead, with emphasis on developing next-generation products for maritime, aviation and other specialized markets, building on Globalstar's technical strengths such as multi-channel capabilities and high-quality CDMA signals. Globalstar will also restart its program of gateway deployment, allowing the company to further improve its coverage and service quality.