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EXHIBIT 99.2
GLOBALSTAR CAPITAL CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF GLOBALSTAR, L.P.)
CONDENSED BALANCE SHEETS
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SEPTEMBER 30, DECEMBER 31,
2000 1999
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(UNAUDITED) (NOTE)
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ASSETS
Receivable from parent...................................... $1,000 $1,000
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LIABILITIES AND SHAREHOLDER'S EQUITY
Commitments and contingencies
Shareholder's equity
Common stock, par value $.10; 1,000 shares authorized, 100
shares issued and outstanding.......................... $ 10 $ 10
Paid-in capital............................................. 990 990
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$1,000 $1,000
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NOTE: The December 31, 1999 balance sheet has been derived from audited
financial statements at that date.
See notes to condensed balance sheets.
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GLOBALSTAR CAPITAL CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF GLOBALSTAR, L.P.)
NOTES TO CONDENSED BALANCE SHEET
1. BASIS OF PRESENTATION
The unaudited interim financial information as of September 30, 2000 has
been prepared on the same basis as the audited balance sheet. In the opinion of
management, such unaudited information includes all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of financial
position for the interim period presented.
2. ORGANIZATION
Globalstar Capital Corporation ("Globalstar Capital"), a wholly-owned
subsidiary of Globalstar, L.P. ("Globalstar") was formed on July 24, 1995 for
the primary purpose of serving as a co-issuer and co-obligator with respect to
certain debt obligations of Globalstar.
Globalstar commenced commercial service in the first quarter of 2000, and
subscriber revenues to date have been lower than originally anticipated. If
Globalstar fails to rapidly and significantly improve its market penetration
rates and revenues, it will be unable to fund its operating costs or service its
debt, unless additional financing can be obtained, as to which there can be no
assurance. If Globalstar is unable to obtain sufficient funds to pay for its
debt service, Globalstar will be in default under its debt facilities.
Globalstar $250 Million Credit Agreement
On June 30, 2000, Globalstar's $250 million credit facility with The Chase
Manhattan Bank which was fully drawn, matured and was thereupon repaid in full
by its guarantors, Lockheed Martin, Qualcomm, DASA and SS/L, who had previously
received warrants for GTL common stock in consideration of their guarantees.
Pursuant to the relevant agreements entered into in 1996, Globalstar issued
three-year notes in the amounts of $206.3 million, $21.9 million, $11.7 million
and $10.1 million to Lockheed Martin, Qualcomm, SS/L and DASA, respectively, in
satisfaction of their subrogation rights. The notes are due on June 30, 2003 and
bear interest, on a deferred basis, at a rate of London Interbank Offer Rate
("LIBOR") plus 3%, and are presented as notes payable and notes payable to
affiliates on the condensed consolidated balance sheet of Globalstar.
On June 30, 2000, Loral Space & Communications Ltd. ("Loral") paid $56.3
million on a net basis to Lockheed Martin in satisfaction of its obligation to
indemnify Lockheed Martin for liability in excess of $150 million under Lockheed
Martin's guarantee of Globalstar's $250 million credit facility. Accordingly,
Loral is entitled to receive notes in respect thereof.
Lockheed Martin, however, has rejected the notes it received and is instead
asking Globalstar for alternative forms of payment, without waiving its claim
that it is entitled to receive an immediate cash reimbursement by Globalstar of
its $150 million payment to the bank lenders. Globalstar disputes Lockheed
Martin's interpretation of the relevant agreements, but is, nonetheless, in
discussions with Lockheed Martin to resolve the dispute.
If the dispute is not resolved, Globalstar cannot be sure that if the
matter were litigated a court would agree with Globalstar's interpretation of
the agreements. Moreover, if as a result of this dispute, a holder of Globalstar
public bonds claimed a cross default under the applicable indentures, and a
court ruled against Globalstar, the maturity date of the bonds would be
accelerated. Management believes, however, that a court would agree with
Globalstar's interpretation of the relevant agreements.
Globalstar $500 Million Credit Agreement
On August 5, 1999, Globalstar entered into a $500 million credit agreement
with a group of banks. The credit agreement provides for a $100 million
three-year revolving credit facility ("Revolver"), a $100 million
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GLOBALSTAR CAPITAL CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF GLOBALSTAR, L.P.)
NOTES TO CONDENSED BALANCE SHEET -- (CONTINUED)
three-year term loan ("Term Loan A") and a $300 million four-year term loan
("Term Loan B"). As of September 30, 2000, all amounts under the $500 million
credit agreement were drawn.
Borrowings under the facilities bear interest, at Globalstar's option, at
various rates based on margins over the lead bank's base rate or the LIBOR for
periods of one to six months. Globalstar pays a commitment fee on the unused
portion of the facilities. The credit agreement contains customary financial
covenants that commence March 31, 2001, including minimum revenue thresholds,
maintenance of consolidated net worth, interest coverage ratios and maximum
leverage ratios. In addition, the credit agreement contains customary
limitations on indebtedness, liens, contingent obligations, fundamental changes,
asset sales, dividends, investments, optional payments and modification of
subordinated and other debt instruments and transactions with affiliates.
One of these covenants would require, among other things, that Globalstar
have revenues of $100 million for the 12 month period ended March 31, 2001.
Globalstar's revenues for the six months ended September 30, 2000, the first six
months of this period, were $1.9 million. Given the level of revenues in the
first six months of this period, Globalstar anticipates that the growth in
revenues during the subsequent six month period will not be sufficient to meet
its $100 million revenue covenant. If Globalstar cannot satisfy this covenant,
obtain waivers or amendments from a majority of the bank lenders, or fulfill the
$500 million obligation in a form satisfactory to all bank lenders, Globalstar
will be in default under its debt facilities (including vendor financing) and
Globalstar's lenders and bondholders would have the right to accelerate payment
of their loans to Globalstar. Loral SatCom Ltd. and Loral Satellite Inc.,
directly and indirectly wholly owned subsidiaries of Loral, have jointly and
severally guaranteed Globalstar's obligation under this credit agreement. Loral
has advised Globalstar that it is currently in negotiations with the banks to
restructure the guarantee arrangements.
