What is the purpose of the agreements between Globalstar and Thermo Funding?

The primary purpose is to satisfy conditions precedent for Globalstar to draw loans under a new Facility Agreement with BNP Paribas and others. These agreements are critical for securing necessary funding for Globalstar's operations.

What is the Series A Convertible Preferred Stock, and what are its implications?

The Series A Convertible Preferred Stock represents the conversion of Thermo Funding's existing secured debt into equity. It is convertible into a significant number of Globalstar's common shares, but its conversion and the exercise of related warrants are subject to shareholder approval and ownership limitations to prevent Thermo from exceeding 70% control of the company.

What is the role of the $60 million contingent equity account?

The $60 million serves as a backstop for Globalstar's liquidity. If Globalstar fails to meet minimum liquidity requirements under the Facility Agreement, it can draw funds from this account. The account is pledged as security, and any draws will result in Thermo Funding receiving Globalstar common stock at a discounted price. Undrawn amounts are returned to Thermo after Globalstar's second loan repayment.

Are there any immediate dilution concerns for common shareholders?

While the Series A Preferred Stock is convertible into a large number of shares, and potential stock issuances are tied to contingent equity draws, immediate dilution is mitigated by the contingent nature of these events. However, significant future dilution is possible if Globalstar draws on the contingent equity or if Thermo converts the preferred stock, subject to Nasdaq rules and ownership caps. The 70% ownership limit also provides some protection against overwhelming control by Thermo.

GSAT 8-K: Material Agreements, Securities & Listing & More

Summary

Globalstar, Inc. filed an 8-K on June 25, 2009, detailing significant agreements with its principal stockholder, Thermo Funding Company LLC, aimed at securing crucial funding under a new Facility Agreement. These agreements are essential for Globalstar to draw down loans from BNP Paribas and its affiliates, which are necessary for its operations. The primary transactions involve Thermo converting its existing secured debt into Series A Convertible Preferred Stock and committing $60 million to a contingent equity account. This contingent equity serves as collateral and a source of liquidity if Globalstar fails to meet certain financial covenants. The Series A Preferred Stock is convertible into a substantial number of common shares, subject to shareholder approval and ownership limitations designed to prevent Thermo from exceeding a 70% stake in Globalstar. The $60 million contingent equity account will be released to Thermo after Globalstar makes its second scheduled loan repayment, expected around June 2012. Thermo will also receive a 10% annual availability fee on the contingent funds, payable in warrants. These arrangements highlight Globalstar's reliance on Thermo for immediate financial needs and underscore the critical nature of the Facility Agreement funding for the company's survival and future operations.

Key Highlights

1Globalstar entered into material definitive agreements with principal stockholder Thermo Funding Company LLC to facilitate the draw of loans under its new Facility Agreement.
2Thermo Funding will exchange its outstanding secured debt for one share of Series A Convertible Preferred Stock, with the exchange contingent on the initial funding under the Facility Agreement by June 30, 2009.
3Thermo Funding committed $60 million to a contingent equity account, pledged as security for Globalstar's obligations under the Facility Agreement and available for draws if liquidity requirements are not met.
4If Globalstar draws from the contingent equity account, Thermo will receive an equivalent number of common shares at a discount (80% of the 15-day VWAP).
5Thermo Funding will receive a 10% annual availability fee on the contingent equity, payable in warrants with a $0.01 exercise price.
6Conversion of preferred stock and exercise of warrants are subject to Nasdaq Listing Rules approval and will not be permitted if Thermo and affiliates exceed 70% ownership of outstanding voting stock.
7The issuance of Series A Convertible Preferred Stock and potential issuance of common stock/warrants are considered unregistered sales under Section 4(2) of the Securities Act of 1933.

Globalstar, Inc. 8-K Report, Material Agreement (Jun 25, 2009)

Summary

Key Highlights

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