American Mobile Satellite Corp. is taking steps to shore up its financing after disclosing the possibility of bankruptcy in its annual Form 10-K report filed April 1 with the Securities and Exchange Commission.
The Reston, Va.-based mobile satellite company said it needed about $350 million over the next two years to support its operations and would need substantial credit support from its stockholders to get it. Principal stockholders in the company include Hughes Electronics Corp., AT&T Wireless Services Inc. and Singapore Telecom.
AMSC said it has begun negotiations for a credit arrangement in the amount of $150 million to $200 million (guaranteed by certain existing stockholders led by Hughes), which would sustain the company until it started generating positive revenue. The proposal involves 5-year warrants to purchase 5 million shares of AMSC’s common stock at $24 per share, the company said.
Hughes also has guaranteed an extension of $40 million in existing indebtedness plus a new $20 million loan, AMSC said.
The company experienced some component damage to its year-old AMSC-1 geostationary satellite during testing and was forced to reconfigure its spotbeams from four to three.
“We are confident the reconfiguration will not impact our customers. The tests validate the robustness of the satellite’s design and underscore our ability to provide quality, dependable mobile communications service across the U.S.,” said Brian Pemberton, AMSC’s president and chief executive officer.
Ottawa-based TMI Communications and Co. L.P. has been reselling AMSC mobile satellite services in Canada since January. The company just launched its own MSAT-1 satellite from Kourou, French Guiana.
The satellite is in transfer orbit and will be maneuvered into geostationary orbit about 22,000 miles up, followed by about five weeks of testing, according to Jim Hone, TMI’s vice president of finance.
Hone said service for TMI’s subscribers is expected to switch over from the AMSC-1 satellite by mid-June and is planned to be “seamless and virtually instantaneous.”
The company does not expect to experience the same technical problems AMSC had.
“We did some shielding recommended by the manufacturer to provide additional protection in the environment up there,” Hone noted.
“This is an exciting day for everyone living, working or traveling in the 80 percent (of Canada) currently underserved by existing telecommunications services,” said John Farrell, TMI’s president and chief executive officer.
“With MSAT services you can have access to the rest of the world from anywhere in the country. Customers are assured of continuous, reliable mobile satellite service for years to come,” he said.
