Struggling satellite communications firm Globalstar has suspended debt repayments in a bid to save cash for continued operations and buy time to secure more subscribers. By mid-January Globalstar had only 31,200 subscribers, well below expectations and insufficient to make the system financially self-sustaining. Rival Iridium went bankrupt in August 1999 with 60,000 subscribers.
Globalstar has cash reserves of $195 million, sufficient to sustain service and marketing operations into next year. The suspension of repayments of principal and interest, and of dividend payouts to shareholders, is expected to save the company $400 million this year. The decision has been endorsed by Globalstar's partners, including co-founders Loral Space &Communications and Qual-comm, which were immediately denied $45 million in repayments as a result.
Globalstar has retained the Blackstone Group as its financial adviser in an effort to restructure the debt, identify funding sources and pursue "other strategic alternatives".
Source: Flight International
