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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
January 7, 1999
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(Exact name of registrant as specified in its charter)
Islands of Bermuda 0-25456 13-3795510
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number
Cedar House, 41 Cedar Avenue, Hamilton, Bermuda HM 12
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(441) 295-2244
GLOBALSTAR, L.P.
(Exact name of registrant as specified in its charter)
Delaware 333-25461 13-3759824
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number
3200 Zanker Road, San Jose, California 95134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(408) 933-4000
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Item 5. Other Events.
On January 7, 1999, Globalstar Telecommunications Limited ("GTL"), a
general partner of Globalstar, L.P. ("Globalstar"), announced that it plans to
sell $350 million of Convertible Preferred Stock in an offering exempt from
registration. Loral Space & Communications Ltd., which owns, directly or
indirectly, approximately 42% of Globalstar on a fully-diluted basis, expects to
maintain its approximate ownership percentage by purchasing $150 million of the
$350 million of Convertible Preferred Stock offered.
GTL will apply the net proceeds of the offering to purchase Convertible
Preferred Partnership Interests in Globalstar. Globalstar, in turn, will apply
the proceeds from the sale of the Convertible Preferred Partnership Interests
towards the continued construction and deployment of its worldwide, low-earth
orbit satellite-based digital telecommunications system.
As of December 31, 1998, Globalstar's budgeted expenditures for the
design, construction and deployment of the Globalstar System to commence
commercial service by September 1999, including working capital, cash interest
on borrowings and operating expenses were approximately $3.3 billion. In
addition to expenditures for operating costs, working capital and debt service,
Globalstar anticipates additional expenditures on system software for the
improvement of system functionality and the addition of new features beyond
those planned for the commencement of commercial service and potential cost
growth in ground segment costs as a result of additional scope and cost growth.
Actual amounts may vary from these estimates and additional funds would be
required in the event of unforeseen delays, cost overruns, launch failures,
technological risks or adverse regulatory developments or to meet unanticipated
expenses.
In addition, Globalstar has agreed to purchase eight additional spare
satellites and long-lead parts for four additional satellites from SS/L at an
estimated cost of $151 million for which payment terms have not as yet been
negotiated. It is anticipated that approximately $104 million of this amount
will be expended by commencement of commercial service. Further, in order to
accelerate the deployment of gateways around the world, Globalstar has agreed to
finance approximately $80 million of the cost of up to 32 of the initial 38
gateways. The contract for the 38 gateways is approximately $345 million. In
December 1997, Globalstar ordered 40,000 fixed access terminals from Ericsson
for $84 million. Further, Globalstar has also agreed to finance approximately
$67 million of the cost of handsets. Globalstar expects to recoup the amounts so
financed following the acceptance by the service providers of the gateways,
fixed access terminals and handsets.
As of December 31, 1998 and after the estimated proceeds of the
offering, Globalstar will have raised or received commitments for approximately
$3.3 billion. Globalstar intends to raise the remaining funds required prior to
the initiation of commercial service of approximately $575 million from a
combination of sources including: high yield debt issuance (which may include an
equity component), equity issuance, financial support from the Globalstar
partners, projected service provider payments and anticipated payments from the
sale of gateways and Globalstar subscriber terminals. Although Globalstar
believes it will be able to obtain these additional funds, there can be no
assurance that such funds will be available on favorable terms or on a timely
basis, if at all. In addition, substantial additional financing will be required
if there are delays in the commencement of commercial service and, in any event,
after the commencement of commercial service and before positive cash flow is
achieved. If Globalstar fails to commence commercial service as planned,
technical or regulatory developments result in a need to modify the design of
all or a portion of the Globalstar System, service provider agreements for
additional territories are not entered into at the times or on the terms
anticipated by Globalstar or other additional costs are incurred, the risk of
which is substantial, additional capital will be required. A substantial
shortfall in meeting its capital needs would adversely affect completion of the
Globalstar System or delay full deployment of all Globalstar satellites. The
ability of Globalstar to achieve positive cash flow will depend upon the
successful and timely construction and deployment of the Globalstar System, the
successful marketing of its services by service providers and the ability of the
Globalstar System to successfully compete against other satellite-based
telecommunications systems, as to which there can be no assurance.
The press release of GTL dated January 7, 1999, a copy of which is
attached hereto as Exhibit 99.1, is hereby incorporated by reference.
This report contains forward-looking statements, including statements
regarding schedules for future satellite launches, commencement of commercial
service of the Globalstar system and additional financing. These forward-looking
statements are based on a number of assumptions and actual results may be
materially different from those expressed or implied by such statements. For a
description of factors that may cause results for Globalstar to differ
materially from those expressed or implied by such forward-looking statements,
please consult the Securities and Exchange Act filings of Globalstar and GTL.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
Exhibit 99.1 Press Release of Globalstar Telecommunications
Limited dated January 7, 1999
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
GLOBALSTAR TELECOMMUNICATIONS
LIMITED
(Registrant)
Date: January 8, 1999 By: /s/ Eric J. Zahler
--------------------------------
Eric J. Zahler
Vice President
GLOBALSTAR, L.P.
-----------------------------------
(Registrant)
By: Loral/QUALCOMM Satellite
Services, L.P.,
its General Partner
By: Loral/QUALCOMM
Partnership, L.P.,
its General Partner
By: Loral General Partner, Inc.
its General Partner
Date: January 8, 1999 By: /s/ Eric J. Zahler
--------------------------------
Eric J. Zahler
Vice President
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EXHIBIT INDEX
Exhibit Description
Exhibit 99.1 Press Release of Globalstar Telecommunications
Limited dated January 7, 1999
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[GLOBALSTAR GRAPHIC]
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Globalstar Telecommunications Ltd.
600 Third Avenue
New York, NY 10016
Tel: (212) 697-1105
Fax: (212) 338-5662
NEWS
For Immediate Release
Contact: Jeanette Clonan
+1-212-338-5658
GLOBALSTAR TO SELL $350,000,000 OF CONVERTIBLE PREFERRED STOCK
IN A RULE 144A OFFERING
NEW YORK - January 7, 1999 - Globalstar Telecommunications Limited (GTL)
announced today that it plans to sell $350 million of Convertible Preferred
Stock in an offering exempt from registration. Loral Space & Communications,
which owns 42% of Globalstar L.P., will purchase $150 million of the $350
million of Convertible Preferred Stock offered.
GTL will apply the proceeds to purchase Convertible Preferred Partnership
Interests in Globalstar, L.P. Globalstar L.P., in turn, will apply the proceeds
from the sale of the Convertible Preferred Partnership Interests towards the
continued construction and deployment of its worldwide, low-earth orbit
satellite-based digital telecommunications system.
The Preferred Stock will be offered only to qualified institutional buyers
pursuant to Rule 144A, and to certain persons in offshore transactions pursuant
to Regulation S under the Securities Act of 1933. The Preferred Stock has not
been registered under the Securities Act of 1933 and may not be offered or sold
in the United States absent registration or an applicable exemption from
registration requirements. This press release does not constitute an offer to
sell or the solicitation of an offer to buy the securities.
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