Loral Space & Communications said it will increase its ownership in Globalstar L.P. to 42 percent, establish a US$210 million fund to reinvest in the mobile satellite service project and add the Soros funds as a significant investor in Globalstar.
Loral has offered to purchase, for its own use and for the benefit of the Soros funds, up to 4.2 million partnership interests in Globalstar from its original service-provider partners for US$100 per partnership interest (corresponding to US$50 per share of GTL stock). This represents 30 percent of each partner’s holdings. Partners that accept the Loral/Soros offer will be required to reinvest half of their proceeds, up to US$210 million aggregate, in Globalstar by establishing an escrow account to be used solely to purchase Globalstar gateways and handsets.
Loral will fund the purchase of the partnership interests through a public offering of about US$500 million of the company’s common stock, or about 16 million shares, representing less than 5 percent of Loral’s equity capitalization. The company plans to use the balance of the offering to invest in its core businesses and to pursue satellite service opportunities.
“This is a win-win proposition, not only for Loral, but also for the investors who need to take some cash out of their investment,” said Timothy O’Neil, an analyst with U.S.-based SoundView Financial Group Inc. “The financial crisis in the Pacific Rim region has forced many of the large service providers who have committed to the satellite project to rethink their position.”
In related news, The Korea Herald has reported that South Korean electronics manufacturer Hyundai Electronics Industries has decided to withdraw from the Globalstar consortium in light of a serious cash shortage.
However, China Telecom Group Ltd. has agreed to invest US$37.5 million to become a full partner in Globalstar.
