8-KMaterial AgreementsFinancial Events

Globalstar, Inc. 8-K Report, Material Agreement (Jul 2, 2019)

Filed July 2, 2019For Securities:GSAT

Summary

Globalstar, Inc. has entered into a Subordinated Loan Agreement for $62 million, effective June 28, 2019, with Thermo Funding Company LLC and other unaffiliated lenders. This new loan is intended to fund a scheduled payment under the Company's existing Facility Agreement with BNP Paribas and others. Notably, the debt to these new lenders is subordinated to Globalstar's existing obligations under the Facility Agreement, meaning they get paid after the primary lenders. The terms of the new loan include a 15% annual interest rate, which will be capitalized (added to the principal) rather than paid in cash. Payments are contingent on the Facility Agreement's provisions. A key covenant requires Globalstar to use its best efforts to refinance both the new loan and its existing facility debt within a specified timeframe. If refinancing doesn't occur within 120 days, Globalstar must facilitate the issuance of registered warrants to the lenders. The Board of Directors has deemed this a 'Permitted Financing' under the company's charter.

Key Highlights

  • 1Globalstar secured a new $62 million subordinated loan facility.
  • 2The new loan's primary purpose is to meet a scheduled payment under an existing Facility Agreement.
  • 3Interest on the new loan accrues at 15% per annum and is capitalized, not paid in cash.
  • 4The new debt is subordinate to Globalstar's existing obligations under the Facility Agreement.
  • 5The company is obligated to use best efforts to refinance the new loan and potentially the existing facility.
  • 6Failure to refinance within 120 days triggers a requirement to issue registered warrants to lenders.
  • 7The new loan matures on December 31, 2023, or upon acceleration.

Frequently Asked Questions

The primary purpose of the $62 million subordinated loan is to fund a scheduled payment due under Globalstar's existing Facility Agreement with BNP Paribas and other parties. It is intended to help manage immediate debt obligations.

The loan carries a 15% annual interest rate, which will be capitalized and added to the principal balance instead of being paid in cash. Payments to these lenders are only permitted if allowed under the existing Facility Agreement. The loan is due on December 31, 2023, unless accelerated.

Globalstar has committed to using its reasonable best efforts to either fully refinance its obligations under both the new loan and the Facility Agreement, or to refinance the new loan and amend the Facility Agreement to allow for it. This indicates a strategic need to restructure its debt.

If the obligations under the new loan are not refinanced within 120 days of the loan agreement date, Globalstar is required to use its best efforts to issue registered warrants for its common stock to the lenders. This could result in dilution for existing shareholders.