Mobile satellite operator Globalstar has announced that it has finally reached an exchange agreement with its 5.75% convertible senior noteholders more than a month after failing to purchase the US$70.7m of notes tendered under a put option.
As part of…
Mobile satellite operator Globalstar has announced that it has finally reached an exchange agreement with its 5.75% convertible senior noteholders more than a month after failing to purchase the US$70.7m of notes tendered under a put option.
As part of the negotiations, the company has also secured a consent agreement from both the lenders and French export credit agency Coface regarding the US$586m senior secured credit facility that is funding the company’s second generation LEO constellation. Under the terms of that facility, Globalstar’s failure to purchase the convertible notes when validly tendered could have led to an event of default.
The note exchange
The exchange agreement sees 91% of the noteholders, worth approximately US$65.6m, surrender their 5.75% notes due 2028, in exchange for approximately US$54.6m of new 8% convertible senior notes, also due 1 April 2028.
In addition, they will receive 30.4 million shares of Globalstar voting common stock and US$14m in cash, with respect to the exchanged notes and their unpaid interest. Globalstar has also deposited US$6.2m with the indenture trustee to purchase the remaining notes from the non-exchanging holders. It also paid US$1.25m to one of the exchange note holders who had sold some of the notes to another holder at a below market price.
Globalstar stated that the new 8% notes include 2.25% of payment-in-kind interest and have a conversion price of US$0.80. The company may redeem the new notes at a 32% premium on 10 December 2013 if its average share price is less than US$0.20 during November. It may also repurchase them at a price equal to their principal amount on 1 April 2018.
As for the noteholders, they may elect to convert up to 15% of their notes on each of 19 July 2013 and 20 March 2014. If they choose to do so, Globalstar can decide whether it will be into cash or stock.
The noteholders also have a put option to require the company to purchase up to all of the notes on each of 1 April 2018 and 1 April 2023.
The consent agreement
As well as consenting to the exchange agreement, the French lenders of the US$586.3m senior secured credit facility have, along with guarantor Coface, agreed to a significant restructuring of their debt.
Under the amended term sheet, the repayment schedule has been adjusted postponing payments of approximately US$235m through 2019. Indeed there will be no principal payments due until December 2014 and the first principal repayment greater than US$5m occurs in June 2016.
The financial covenants of the facility have also been modified in recognition of the delays in the final delivery in space of the 2nd generation satellites.
In return, the interest rate on the facility has been increased by 0.5% and from the beginning of 2017 will increase by an additional 0.5% each year until maturity in December 2019. The loan currently bears an interest at a floating 6-month LIBOR rate, plus 2.25% through December 2017 and now increases 2.9% thereafter.
The lenders, comprising BNP Paribas, Credit Agricole, Credit Industriel et Commercial, Natixis and Societe Generale, will also receive a restructuring fee.
The parties also agreed to an amendment to the facility’s change of control covenant to require a mandatory prepayment of the facility if Globalstar chairman and CEO Jay Monroe and his affiliates, specifically his investment vehicle Thermo Funding Company, own less than 51% of the satellite operator.
Thermo’s equity investment
Pursuant to both the consent agreement and exchange agreement, Thermo agreed to fund or arrange US$85m of capital for Globalstar.
That amount is split between an initial investment of US$25m to satisfy all cash requirements associated with the exchange transaction, and an incremental equity backstop of US$60m through 2014.
Thermo has already invested US$5m of this backstop in connection with the closing of the transactions.
The backstop will be reduced to the extent Globalstar raises capital from third party investors.
Globalstar also pointed out that the US$30m available through a committed issuer managed equity financing facility from Terrapin Opportunity remains undrawn.
Monroe’s relief at done deal
Having held negotiations on the debt restructuring for the past couple of months, Globalstar chief Jay Monroe expressed his relief at reaching an agreement. He said: “We could not be more thrilled to have completed the exchange and to reach an agreement to amend the Coface facility agreement. Not only will the amendment materially improve our debt amortization schedule, postponing an aggregate US$235m in principal payments through 2019, but the parties have also provided for a significant financing backstop by Thermo that will bolster the company’s long-term liquidity resources including a cash cushion and a fully funded business plan, according to our current projections.
“While the exchange and the initial financings are complete, we anticipate closing the amendment as soon as possible. Most importantly, we have cleared the way for Globalstar to focus purely upon operational execution. Solving the company’s liquidity related issues enables management to devote all of our energies to the pursuit and capture of significant growth and spectrum asset opportunities afforded by the restoration of our Duplex service.”
He added: “All of the pieces of the puzzle are finally in place – our second-generation constellation is fully launched, Duplex revenue growth is starting to accelerate, customers are being rewarded for their loyalty as service levels have significantly improved, and we are launching five new products during 2013 that demonstrate our commitment to the commercial and consumer MSS markets.
“Upon closing of the amendment, we will have the financial flexibility necessary for the realisation of our significant strategic and operational opportunities. We extend our gratitude to the exchanging convertible note holders, our dedicated senior French bank group and the French authorities who have worked tirelessly on the accomplishment of this colossal feat. This is an exciting time for Globalstar.”
