Globalstar, Inc. has announced that the Company has entered into a satellite procurement agreement with Macdonald, Dettwiler and Associates Corporation (MDA) pursuant to which Globalstar will acquire 17 new satellites that will replenish and extend the life of Globalstar’s existing constellation. Globalstar is acquiring the satellites to provide continuous satellite services to the potential customer under the Terms Agreement described in the Company’s Annual Reports, as well as services to Globalstar’s current and future customers. Rocket Lab USA, Inc. is the principal satellite bus subcontractor under the Procurement Agreement.
As stated above, Globalstar is acquiring the new satellites to provide satellite services to the potential customer under the Terms Agreement, as well as services to Globalstar’s current and future customers. Accordingly, as the potential customer has approved the amounts related to the construction of the new satellites, subject to certain conditions and limitations, the potential customer will reimburse Globalstar for 95% of the approved capital expenditures Globalstar makes in connection with the new satellites, interest costs of the Company’s borrowings related to the new satellites as well as termination costs, should any arise. In addition, if it elects to obtain services from Globalstar under the Terms Agreement, the potential customer is obligated to make service payments and cost reimbursements to Globalstar in amounts that would be material to the Company.
The total contract price for the initial 17 satellites is $327.0 million. Globalstar maintains the option to acquire up to nine additional satellites with flexibility in timing to place such order in addition to other optional services under the contract. If Globalstar elects to acquire new satellites, each satellite will be priced at $11.4 million, subject to certain price adjustments. The Procurement Agreement requires the Contractor to deliver the satellites by 2025, with an expectation that all satellites will be launched by the end of 2025. Globalstar plans to contract separately for launch services and launch insurance for the new satellites.
David Kagan, Globalstar’s CEO stated, “After running a competitive process with multiple bidders, we are very pleased to announce the selection of MDA in partnership with Rocket Lab for the construction of our new satellites. The combination of these vendors offered us the best overall balance of innovation, technical capability, schedule reliability and cost. These new satellites will ensure Globalstar’s ability to provide the highest quality mobile satellite services to its customer over the long-term. We look forward to beginning the process of bending metal and readying the new satellites for launch beginning in approximately three years.”
The Procurement Agreement provides for deferrals of milestone payments from February 2022 through August 2022, at a 0% interest rate. On August 16, 2022, all deferred payments will become due by which time Globalstar expects to complete a senior secured financing. This financing is expected to provide sufficient proceeds for the construction and launch of the new satellites, and the Company expects to refinance its current senior credit facility concurrent with or after the financing.