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Globalstar may file for bankruptcy protection

The satellite-based mobile phone company says it may seek bankruptcy protection if it cannot raise more cash or agree to a restructuring plan with creditors.

2 min read
Globalstar Telecommunications, a satellite-based mobile phone company, said in a regulatory filing Monday that it may seek bankruptcy protection if it cannot raise more cash or agree to a restructuring plan with its creditors.

Globalstar had $197 million in cash and cash equivalents at the end of 2000, enough to last through 2001, according to a filing with the U.S. Securities and Exchange Commission. "We don't expect that Globalstar will be generating sufficient revenues at the conclusion of 2001 to continue operations for a significant period beyond 2001 without additional financing," the company said in the filing.

The company hired The Blackstone Group as its financial adviser to "assist in evaluating its business plan and developing initiatives, including restructuring its debt, identifying funding opportunities and pursuing other strategic alternatives." But the company said Monday that bankruptcy protection might be necessary if it can't reach a restructuring agreement.

Globalstar stopped making its debt payments to its creditors earlier this year. Iridium, the world's first satellite phone system, fell into similar financial problems before filing for bankruptcy last year.

In addition, Globalstar, which has seen its stock plunge 96 percent in the past year, said it was informed in March by the Nasdaq Stock Market that its shares could be delisted in April if they continue to trade below $1. Globalstar shares on Monday rose 10 cents, or 17 percent, to 68 cents. In after-hours trading, Globalstar stock fell 30 percent to 41 cents.

Globalstar, which said it had 40,009 subscribers as of March 18, up from 30,583 at the end of 2000, has attracted fewer customers than expected. Iridium and ICO Global Communications filed for bankruptcy protection last year, and their history leaves many analysts and investors skeptical that Globalstar will face anything but a similar fate. High phone and service costs, when compared with cellular wireless phone services, have hampered the satellite phone companies' ability to attract consumers.

Globalstar also reported its quarterly financial results Monday.

Based in New York and backed by Loral Space & Communications, Globalstar took a $2.9 billion charge in the fourth quarter to write down the value of its satellite phone network. That gave the company a loss of $3.8 billion in 2000. The company had $1.1 million in fourth-quarter sales, flat when compared with the third quarter.

Bloomberg contributed to this report.