PARIS -- Mobile satellite services provider Globalstar Inc. has completed a life-saving financial package featuring key backing by France's export-credit agency, Coface, a deal whose $738 million in total value will permit Globalstar to build and launch 24 second-generation satellites by the end of 2010, Globalstar Chief Executive Jay Monroe said.

 

Nearly 11 months in the making, the financial package, organized by a consortium of French banks led by BNP Paribas, will allow Globalstar contractors — mainly satellite builder Thales Alenia Space of France and Italy, and the France-based Arianespace commercial launch consortium — to return to full production of their Globalstar hardware.

 

Emmanuel Grave, Thales Alenia Space senior vice president for telecommunications satellites, confirmed July 2 that the company had received fresh cash from Globalstar and its bankers July 1, and that the prime contractor will now throttle up production in time to deliver the first six second-generation Globalstar satellites by late in the first quarter of 2010. Three more six-satellite batches will be delivered later in 2010, he said.

 

An official with the Arianespace launch consortium of Evry, France, said June 30 the company had reserved four Soyuz rockets and performed sufficient work on a Soyuz-mounted Globalstar satellite dispenser to meet a schedule calling for four launches in 2010.

 

In a June 30 interview, Monroe said Milpitas, Calif.-based Globalstar now has all the money it needs to build, insure and launch the first 24 second-generation Globalstar satellites, to be launched six at a time on Russian Soyuz rockets operated from Russia's Baikonur Cosmodrome in Kazakhstan. Arianespace oversees commercial Soyuz launches from the Baikonur site via its Starsem affiliate.

 

The financing also will pay for the ground-segment modifications needed for the new satellites. Globalstar Chief Financial Officer Fuad Ahmad said June 30 that the funding means Globalstar will need no further financial aid — from the Monroe-run Thermo Capital Partners LLC or anyone else — for the foreseeable future.

 

Coface has agreed to guarantee 95 percent of a $586 million credit facility under which Thales Alenia Space and Arianespace should see money flowing into their accounts starting July 1, according to Debbie Hirst, a BNP Paribas managing director who coordinated the banking consortium.

 

"The package closed on June 29," Hirst said in a June 30 interview. "It was structured as a traditional project-finance deal where it takes two days before the funds are released." The first disbursement, set for July 1, is around $276 million, Hirst said.

 

Coface is guaranteeing 95 percent of the $586 million bank-loan package, with the banking consortium supporting the remaining 5 percent without export credit agency backing. The Monroe-managed Thermo, to satisfy the bankers' demands, was obliged to convert $180 million of Globalstar debt into stock, and to deposit $60 million into an account to be made available to Globalstar, with an additional $45 million to be directly invested in the company.

 

A debt-payment accounting was also established for Globalstar to draw on, as needed, in the amount of $46.8 million.

 

Globalstar contractors Thales Alenia Space, Arianespace and Hughes Network Systems also agreed to invest small amounts of cash into the project to help seal the deal, which Hirst said had received French political support including the backing of French Finance Minister Christine Lagarde.

 

"This is a very important project for French industry," BNP's Hirst said. "There are 400 people in France and 200 in Italy who would have to be reassigned to other projects if Globalstar did not continue. This will also permit Thales to develop a new platform."

 

Hirst said BNP and the other banks performed their own due-diligence analysis of Globalstar and concluded that the company would clearly be able to repay its loans.

The arrival of the Coface-backed funds brings to a conclusion one of the more extraordinary financings ever assembled in an industry that does not lack for unlikely deals. Only a few months ago, Globalstar's competitors were writing the company's obituary and positioning themselves to divvy up Globalstar's customers.

 

"This has required a lot of discussion and gone through more ups and downs than anyone will ever know," Hirst said. "I was given a folder [analyzing Globalstar] in August 2008. I kicked it, shook it and let the numbers fall out."

 

Closing the financing was made more difficult because Globalstar is not a core client to any bank and does not have a record of bank financing — nor does anyone else in the mobile satellite services sector. There was also Globalstar's 2002 Chapter 11 bankruptcy filing, which wiped out its existing debt and permitted Monroe's Thermo to purchase the constellation for a fraction of its original cost.

 

"In the end, it all boils down to the moral character of the people involved," Hirst said. But she said it also benefited from the personal involvement of the French finance minister, and of Globalstar's contractors — in addition to more Monroe-provided Thermo cash.

 

Hirst said the BNP-led bank group stress-tested Globalstar's business prospects and concluded it could repay the loans even if it relies only on its future North America-based revenue.

 

"Our role is to defend the business case so that the French government is not going to lose money," Hirst said. "This obviously required a lot of discussion given the current situation in the banking sector and the overall economy. It has been a big challenge, especially since Globalstar and the sector it is in" — mobile satellite services — "is not known to banks, and you had the history of bankruptcy. Jay Monroe never stopped, never let up. Whenever we had a question, he was there. It was his unending efforts that got this done."