Mobile satellite operator Globalstar has entered into a forbearance agreement with approximately 78% of its 5.75% convertible senior noteholders in order to give the company time to agree to a restructuring of the debt.
Under the terms of the…
Mobile satellite operator Globalstar has entered into a forbearance agreement with approximately 78% of its 5.75% convertible senior noteholders in order to give the company time to agree to a restructuring of the debt.
Under the terms of the forbearance agreement, the noteholders have agreed to not declare an acceleration and enforcement of the notes, which are due in 2028, until 15 April 2013. Globalstar is aiming by this point to have secured an exchange transaction with the forbearing noteholders, although to do so it also requires the consent of the lenders under its US$675m Coface-guaranteed senior secured credit facility.
The reasoning behind the forbearance agreement stems from Globalstar having to launch a mandatory tender offer to purchase the notes at par due to a put option in their terms.
The satellite operator subsequently did so on 4 March 2013 and by the end of the offer period on 29 March, holders representing 98.4% of the outstanding notes, worth approximately US$70.65m, had exercised this right.
However, on 1 April Globalstar stated that it did not have sufficient funds to pay this purchase price.
In addition, Globalstar has failed to make the required interest payment of US$2.064m on the notes for the six months ended 31 March, 2013. This would constitute an event of default under the notes but for the forbearance agreement.
In turn, the company’s failure to either purchase the tendered notes or make the necessary interest payments also constitutes an event of default under the US$675m credit facility.
Jay Monroe, Globalstar’s CEO, said, “The forbearance agreement demonstrates the note holders’ support for Globalstar and provides a runway for further discussions towards a mutually agreeable restructuring of the notes.”
If Globalstar is unable to successfully negotiate and complete a debt restructuring, the company said it ‘intends to explore other available restructuring and reorganization alternatives’.
At the beginning of the year, Globalstar signed a committed issuer managed equity financing facility of up to US$30m from investment fund Terrapin Opportunity. The deal gives the satellite operator the ability to draw up to US$30m over a 24-month period by requiring Terrapin to purchase a specified dollar amount of shares.
Commenting on the deal at the time, Monroe said: “This facility provides us with funds to help finance our capital obligations over the next two years.”
That financing came just over a week after Globalstar delisted from the Nasdaq stock exchange having failed to comply with listing rules that require a minimum bid price of US$1 per share.
