Has Globalstar stopped shining?
Struggling mobile satellite firm Globalstar has hired the Blackstone Group to restructure its operations in a last minute bid to fight off the threat of bankruptcy. The company lost $145 million in the second quarter of 2001.
The end appears to be close for struggling mobile satellite operator Globalstar after it slashed its workforce in half and admitted it only has enough cash to last till the end of this year.
In spite of pulling in a few thousand more subscribers in key markets such as Russia and Brazil, the Bermuda-based company posted yet another loss for the second quarter of this year, forcing the operator to drop 50 per cent of its employees. Globalstar is now being run by a skeleton staff of just 175 people.
“We would expect a restructured Globalstar to have a lower operating cost base, a shorter route to our customers with non-exclusive distribution, and the gateway network integrated into this single organisation,” said Olaf Lundberg, Globalstar’s chairman.
Lundberg was bought in earlier this year to try and save the ailing company, but its inexorable downward slide has continued regardless.
Admitting that it has only $98 million of working capital left, the company said that it would continue to suspend principal and interest payments on al of its funded debts, including its credit facility, vendor financing and senior notes.
The second quarter loss for this year hit $145 million, a loss of 40 cents per share for the publicly traded part of the company. Losses were the same in the first quarter of 2001.
The scant good news for Globalstar was an increase of 21 per cent in net revenues, climbing to $1.8 million including royalty income from phone sales. Gross service revenues were also up, this time 13 per cent to $2.3 million.
The operator had just under 52,000 subscribers at the end of the second quarter, and had gained 3,000 more by the end of July. However, this is way down on the numbers the operator, the first to offer total coverage of Saudi Arabia, needs to survive.
But Globalstar isn’t going to go down without a fight. The company has hired the Blackstone Group to help restructure the company along more efficient lines, and the Group’s corporate rescue advisor is having regular meetings with a committee of Globalstar investors. They are considering a series of options, including pre-packaged bankruptcy.