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Globalstar May Be Forced to Suspend Operations

April 03, 2001|From Bloomberg News

NEW YORK — Globalstar, the holding company that owns Globalstar Telecommunications Ltd., said it may shut down by the end of this year if it is unable to raise more cash, according to a filing with the U.S. government.

Globalstar had $197 million in cash and cash equivalents at the end of 2000, enough to last through 2001, it said in a filing with the Securities and Exchange Commission. The company's largest shareholder is Loral Space & Communications Ltd.

New York-based Globalstar, which sells satellite-based telephone service, took a $2.9-billion charge in the fourth quarter to write down the value of its satellite-phone network. That gave Globalstar a loss of $3.8 billion in 2000, spokesman Mac Jeffery said. The company, which had $1.1 million in fourth-quarter sales, didn't report its loss for that period.

"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.

Globalstar said in the filing that it may seek bankruptcy protection if it can't restructure. Globalstar hired the Blackstone Group in January to help it restructure its debt and identify funding opportunities. Globalstar said in January that it would be unable to make debt payments this year.

Like rivals Iridium and ICO Global Communications Ltd., which already have filed for bankruptcy protection, Globalstar has attracted fewer customers than expected. The company's shares have plunged 96% in the last year.

Equipment problems and higher prices than rival cellular services made users leery of using the phones, analysts have said. The company had 40,009 customers as of March 18.

Globalstar shares rose 10 cents to close at 68 cents during Monday trading on the Nasdaq Stock Market.

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