Globalstar can't buy notes or make interest payment, inks forbearance

By Caroline Salls

Pittsburgh, April 1 - Globalstar, Inc. has entered into a forbearance agreement with the holders of about 78% of its 5.75% convertible senior notes due 2028 to give the company a further opportunity to negotiate a notes restructuring, according to a news release.

Globalstar said holders of $70.65 million, or 98.4%, of the notes exercised their rights under a previously announced offer to purchase the notes at par on April 1.

The company said it currently does not have enough funds to pay this purchase price.

In addition, Globalstar said it failed to make a $2.06 million required interest payment on the notes for the six months ended March 31.

Failure to make the interest payment by April 30 would also constitute an event of default on the notes.

The company said the forbearance agreement is designed to prevent the acceleration and enforcement of the notes as a result of its failure to pay the purchase price or make the April interest payment.

If the notes obligations are accelerated, an event of default may occur under up to $675 million in other funded debt, the release said.

Under the forbearance agreement, the holders of roughly 78% of the notes have agreed not to accelerate the notes until 11:59 p.m. ET on April 15.

According to an 8-K filed Monday with the Securities and Exchange Commission, the forbearance period will end earlier than April 15 if the company breaches the agreement, another default occurs under the indenture, an involuntary bankruptcy case is filed that is not timely opposed by Globalstar, more than $5 million in funded debt other than the notes is accelerated, the notes obligations are accelerated by trustee declaration other than by the forbearing noteholders and filing of any voluntary bankruptcy, insolvency or reorganization proceedings.

During the forbearance period, the company will not purchase any notes or pay any of the purchase price for or interest on the notes and will try to obtain the consent of senior secured credit facility lenders to a notes exchange transaction.

"The forbearance agreement demonstrates the noteholders' support for Globalstar and provides a runway for further discussions toward a mutually agreeable restructuring of the notes," chief executive officer Jay Monroe said in the release.

If it is unable to negotiate and complete a debt restructuring, the company said it plans to explore other available restructuring and reorganization alternatives.

Based in Covington, La., Globalstar is a provider of mobile voice and data communications services via satellite.

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