Globalstar files for Chapter 11

New York, Feb. 15 - Globalstar LP said it reached agreement with several major creditors on a debt restructuring and filed for protection under Chapter 11 of the bankruptcy court in the U.S. Bankruptcy Court in Delaware.

Under the proposed restructuring, existing bondholders and other unsecured creditors will own the company. There will be an option to issue additional shares at a future point to gateway operators outside the U.S. and Canada who may wish to invest in the company.

Existing partnership interests in Globalstar LP including those held by publicly traded Globalstar Telecommunications Ltd. will be canceled, likely leaving shares in Globalstar Telecommunications with very little or no value.

The plan includes a rights offering to common shareholders in Globalstar Telecommunications and Globalstar LP creditors giving them the option to purchase shares in the new company.

A new Globalstar company will be created to take ownership of all Globalstar LP's existing assets, including its satellite constellation and related operations. The new company will also acquire all equity stakes in three of its service providers - Globalstar USA, Globalstar Caribbean and Globalstar Canada - that were originally held by Vodafone Group Plc and Loral Space & Communications.

Normal operations will continue uninterrupted during the Chapter 11 process, Globalstar said.

Announcing the bankruptcy filing, Globalstar said it had warned on Nov. 14, 2001 that such a step was likely, given that although demand for its service has continued to grow the cost of servicing debt has outpaced revenues.

"This filing is an important first step in establishing a new Globalstar with renewed credibility, enabling it to address new business opportunities and to further broaden our customer base,'" said Olof Lundberg, chairman and CEO of Globalstar, in a news release. "Potential customers have told us that we need to demonstrate financial viability and a commitment to the future. Now with this step, we're ready to begin."

As part of the agreement with creditors, Globalstar said will begin implementing a new business model, including an aggressively priced service using existing system capacity and phone inventories to build cash flow, consolidation of selected gateways into the new Globalstar company, allowing Globalstar to assume responsibility for marketing and operations in several of its largest markets, and focusing marketing efforts on high-potential countries and customer segments, primarily enterprise customers, and with particular attention to aviation, maritime and government services.

Globalstar said it has $46 million of cash on hand.

Additional investment will likely be needed to take the company to cash-flow breakeven, Globalstar said, adding that the amount will be less than would have been needed under the earlier business model. Globalstar said it is currently in discussions with possible investors.

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