EX-99.2 6 ex99-2.txt FINANCIAL STATEMENTS - GLOBALSTAR CAPITAL CORP. 1 EXHIBIT 99.2 GLOBALSTAR CAPITAL CORPORATION (A WHOLLY-OWNED SUBSIDIARY OF GLOBALSTAR, L.P.) CONDENSED BALANCE SHEETS
JUNE 30, DECEMBER 31, 2000 1999 ----------- ------------ (UNAUDITED) (NOTE) ASSETS Receivable from parent...................................... $1,000 $1,000 ====== ====== 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 ------ ------ $1,000 $1,000 ====== ======
NOTE: The December 31, 1999 balance sheet has been derived from audited financial statements at that date. See notes to condensed balance sheets. 2 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 June 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 became due, and was thereupon repaid in full by its guarantors, including Lockheed Martin Corporation ("Lockheed Martin"), Qualcomm, DASA and SS/L, who had previously received warrants for GTL common stock in consideration of their guarantee. 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 LIBOR plus 3%. 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 to issue new securities with additional rights and enhanced value, 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 the 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 3 three-year term loan ("Term Loan A") and a $300 million four-year term loan ("Term Loan B"). As of June 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 London Interbank Offer Rate ("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 quarter ended June 30, 2000, the first three months of this period, were $708,000. Unless Globalstar can satisfy this covenant or obtain waivers or amendments from a majority of the bank lenders, Globalstar will be in default under its debt facilities and Globalstar's lenders and bondholders would have the right to accelerate payment of their loans to Globalstar.