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posted: 2 July 2009
05:00 PM ET

$738M FINANCING PACKAGE GIVES GLOBALSTAR A NEW LEASE ON LIFE

$738M FINANCING PACKAGE GIVES GLOBALSTAR A NEW LEASE ON LIFE

PRESIDENT ORDERS SWEEPING U.S. SPACE POLICY REVIEW

OBAMA ITAR REFORM COULD MOVE SATELLITES BACK TO COMMERCE      

SATELLITE FLEET OPERATORS FLYING ABOVE TROUBLED WORLD ECONOMY

SATELLITE TELECOM STARTUP TARGETS PENTAGON MARKET

 


 

$738M FINANCING PACKAGE GIVES GLOBALSTAR A NEW LEASE ON LIFE

 

By PETER B. de SELDING

Space News Staff Writer

 

PARIS — Mobile satellite services provider Globalstar Inc. has completed a life-saving financial package featuring key backing by France's export-credit agency, Coface, a deal whose $738 million in total value will permit Globalstar to build and launch 24 second-generation satellites by the end of 2010, Globalstar Chief Executive Jay Monroe said.

 

Nearly 11 months in the making, the financial package, organized by a consortium of French banks led by BNP Paribas, will allow Globalstar contractors — mainly satellite builder Thales Alenia Space of France and Italy, and the France-based Arianespace commercial launch consortium — to return to full production of their Globalstar hardware.

 

Emmanuel Grave, Thales Alenia Space senior vice president for telecommunications satellites, confirmed July 2 that the company had received fresh cash from Globalstar and its bankers July 1, and that the prime contractor will now throttle up production in time to deliver the first six second-generation Globalstar satellites by late in the first quarter of 2010. Three more six-satellite batches will be delivered later in 2010, he said.

 

An official with the Arianespace launch consortium of Evry, France, said June 30 the company had reserved four Soyuz rockets and performed sufficient work on a Soyuz-mounted Globalstar satellite dispenser to meet a schedule calling for four launches in 2010.

 

In a June 30 interview, Monroe said Milpitas, Calif.-based Globalstar now has all the money it needs to build, insure and launch the first 24 second-generation Globalstar satellites, to be launched six at a time on Russian Soyuz rockets operated from Russia's Baikonur Cosmodrome in Kazakhstan. Arianespace oversees commercial Soyuz launches from the Baikonur site via its Starsem affiliate.

 

The financing also will pay for the ground-segment modifications needed for the new satellites. Globalstar Chief Financial Officer Fuad Ahmad said June 30 that the funding means Globalstar will need no further financial aid — from the Monroe-run Thermo Capital Partners LLC or anyone else — for the foreseeable future.

 

Coface has agreed to guarantee 95 percent of a $586 million credit facility under which Thales Alenia Space and Arianespace should see money flowing into their accounts starting July 1, according to Debbie Hirst, a BNP Paribas managing director who coordinated the banking consortium.

 

"The package closed on June 29," Hirst said in a June 30 interview. "It was structured as a traditional project-finance deal where it takes two days before the funds are released." The first disbursement, set for July 1, is around $276 million, Hirst said.

 

Coface is guaranteeing 95 percent of the $586 million bank-loan package, with the banking consortium supporting the remaining 5 percent without export credit agency backing. The Monroe-managed Thermo, to satisfy the bankers' demands, was obliged to convert $180 million of Globalstar debt into stock, and to deposit $60 million into an account to be made available to Globalstar, with an additional $45 million to be directly invested in the company.

 

A debt-payment accounting was also established for Globalstar to draw on, as needed, in the amount of $46.8 million.

 

Globalstar contractors Thales Alenia Space, Arianespace and Hughes Network Systems also agreed to invest small amounts of cash into the project to help seal the deal, which Hirst said had received French political support including the backing of French Finance Minister Christine Lagarde.

 

"This is a very important project for French industry," BNP's Hirst said. "There are 400 people in France and 200 in Italy who would have to be reassigned to other projects if Globalstar did not continue. This will also permit Thales to develop a new platform." 

 

Hirst said BNP and the other banks performed their own due-diligence analysis of Globalstar and concluded that the company would clearly be able to repay its loans.

 

The arrival of the Coface-backed funds brings to a conclusion one of the more extraordinary financings ever assembled in an industry that does not lack for unlikely deals. Only a few months ago, Globalstar's competitors were writing the company's obituary and positioning themselves to divvy up Globalstar's customers. 

 

"This has required a lot of discussion and gone through more ups and downs than anyone will ever know," Hirst said. "I was given a folder [analyzing Globalstar] in August 2008. I kicked it, shook it and let the numbers fall out."

 

Closing the financing was made more difficult because Globalstar is not a core client to any bank and does not have a record of bank financing — nor does anyone else in the mobile satellite services sector. There was also Globalstar's 2002 Chapter 11 bankruptcy filing, which wiped out its existing debt and permitted Monroe's Thermo to purchase the constellation for a fraction of its original cost.

 

"In the end, it all boils down to the moral character of the people involved," Hirst said. But she said it also benefited from the personal involvement of the French finance minister, and of Globalstar's contractors — in addition to more Monroe-provided Thermo cash.

 

Hirst said the BNP-led bank group stress-tested Globalstar's business prospects and concluded it could repay the loans even if it relies only on its future North America-based revenue.

 

"Our role is to defend the business case so that the French government is not going to lose money," Hirst said. "This obviously required a lot of discussion given the current situation in the banking sector and the overall economy. It has been a big challenge, especially since Globalstar and the sector it is in" — mobile satellite services — "is not known to banks, and you had the history of bankruptcy. Jay Monroe never stopped, never let up. Whenever we had a question, he was there. It was his unending efforts that got this done."

   

  

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PRESIDENT ORDERS SWEEPING U.S. SPACE POLICY REVIEW

 

By AMY KLAMPER
Space News Staff Writer

 

WASHINGTON — U.S. President Barack Obama has given his administration until Oct. 1 to scrutinize existing national space policy as part of a sweeping review that could culminate in a new strategy governing American civil and military space activities.  

 

Sources familiar with the Obama review say it will address a range of topics that fall into several categories, including space protection, international cooperation, acquisition reform and national space strategy.

 

Led by Peter Marquez, director of space policy for the White House National Security Council, the review will involve a slew of U.S. offices and agencies, including the White House Office of Science and Technology Policy, the U.S. Commerce, Defense, Homeland Security, Interior, State, Treasury and Transportation departments, and U.S. intelligence agencies.

 

In May, Obama issued Presidential Study Directive-3 (PSD-3), calling for a broad review of the U.S. national space policy of former President George W. Bush. Sources familiar with the review note that PSD-3 is the second presidential directive issued during Obama's first few months in office to address space. PSD-2 will address classified space activities, these sources said. 

 

Multiple sources familiar with the Obama policy review say it could lay the foundation for further debates within the executive branch this fall, potentially leading to a revised U.S. national space policy by mid-2010.

 

Preliminary reviews of the Bush space policy are currently under way, with teams led by White House, intelligence, Defense and State department officials charged with identifying specific areas for further study. Although NASA is not leading any of the teams, sources familiar with the space policy review said agency officials are engaged in the effort. In addition, the review is expected to incorporate results from a blue-ribbon panel charged with assessing the future of NASA's manned spaceflight programs. The panel, led by retired Lockheed Martin Chief Executive Norman Augustine, will present its findings to the Obama administration in late August. 

 

Bush's October 2006 space policy emphasized security issues, sought to foster commercial enterprise and rejected new arms control agreements that would limit U.S. activities in space. It capped a series of space policy edicts released earlier in his administration that addressed remote sensing, space transportation, navigation and the 2004 Vision for Space Exploration, which called for replacing the space shuttle with a system capable of taking humans to the Moon.  

 

Bush was criticized in the media for taking a unilateral tone in his October 2006 policy document. In contrast, the Obama administration is expected to emphasize international cooperation, adopting a more inclusive approach with allies in addressing space access and other strategic concerns. 

 

"There's enough of a sense in the Obama people that the tone of the Bush policy is not what they want to communicate," said John Logsdon, a space policy expert at the Smithsonian's National Air and Space Museum here. "It's very clear that Obama in general, and with respect to space, intends to take a much more multilateral approach."  

 

Sources familiar with the review say U.S. outreach and cooperation with international partners on space activities is an area ripe for study, as is reform of the U.S. export control regime with regard to commercial communications satellites. In June, the U.S. House of Representatives approved legislation that would give the administration authority to remove commercial satellites and components from rigorous State Department export licensing requirements. 

 

Other topics on the table include commercial remote sensing, technology industrial base and acquisition reform, the need to maintain two expendable launch vehicles and a review of the Bush administration's stance on weapons in space.

 

During his 2008 presidential campaign, Obama called for a ban on space weapons, a controversial statement that found its way onto the White House Web site shortly after his Jan. 20 inauguration. The statement has since been removed.

 

International discussions of space weapons have typically foundered on disagreements over what constitutes a space weapon and verification concerns about any proposed ban. Scott Pace, director of the Space Policy Institute at George Washington University here, said a more achievable goal might be a ban on the creation of long-lived orbital debris that could threaten satellites and other spacecraft, including the international space station.  

 

"An international agreement on preventing orbital debris could contribute to the sustainability of the overall space environment," Pace said.

 

Earth's orbit is populated by approximately 17,000 objects larger than 10 centimeters and some 200,000 objects between 1 and 10 centimeters in diameter, according to the NASA Orbital Debris Program Office at Johnson Space Center in Houston. In early 2007 China shot down an aging Chinese weather satellite with a ballistic missile. The breakup of the Fengyun-1C satellite resulted in a debris cloud comprising a large number of fragments that pose a collision risk to operating satellites and spacecraft.

 

Since U.S. policy on space debris was first articulated by U.S. President Ronald Reagan's administration in 1988, the United States has sought to minimize the creation of new orbital debris. According to the 2006 Bush national space policy, "Orbital debris poses a risk to continued reliable use of space-based services and operations and to the safety of persons and property in space and on Earth. The United States shall seek to minimize the creation of orbital debris by government and non-government operations in space in order to preserve the space environment for future generations." 

 

 

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OBAMA ITAR REFORM COULD MOVE SATELLITES BACK TO COMMERCE

 

By AMY KLAMPER
Space News Staff Writer

 

WASHINGTON — As it launches a sweeping review of U.S. space policy, the administration of President Barack Obama has given indications that it is open to removing commercial telecommunications satellites from the U.S. Munitions List (USML), a shift that could make American satellite companies more competitive in the global market.

 

Ellen Tauscher, who was confirmed June 25 as U.S. undersecretary of state for arms control and international security, said in June that reform of the U.S. export control regime, known as the International Traffic in Arms Regulations (ITAR), is on the administration's agenda.

 

"We are going to review our export control policies," the former Democratic congresswoman from California said during her June 9 confirmation hearing before the Senate Foreign Relations Committee. Later, in a written response to questions asked by committee ranking member Sen. Richard Lugar (R-Ind.), Tauscher said she "supports export control reform in general and would consider supporting the transfer of commercial communications satellites to the Department of Commerce provided that the transfer is consistent with our foreign policy and national security objectives."

 

Commercial communications satellites were placed on the USML, a registry of sensitive technologies regulated by the U.S. State Department, by a U.S. law that went into effect in 1999. Since then, U.S. space hardware makers have complained about lost market opportunities, and even many in the U.S. military establishment have said the move has harmed national security by undermining the American defense industrial base.

 

In June the House passed legislation in the Foreign Relations Authorization Act for 2010 and 2011 that would give the Obama administration authority to remove commercial satellites from the USML. The bill now awaits consideration by the Senate Foreign Relations Committee.

 

"The administration supports efforts to determine the appropriate jurisdiction of satellites and their parts and components, and looks forward to working with Congress on this issue," David McKeeby, spokesman for the State Department Bureau of Political-Military Affairs, said in a July 1 e-mailed statement to Space News.

 

During her confirmation hearing, Tauscher spoke broadly of balancing U.S. national security interests with helping American companies compete in a global marketplace marked by rapid technological innovation.

 

"I believe we have to understand that the life cycle of technology these days can be as short as 18 months," she said. "You could actually have an item that is, you know, release 1.0, and right following it in a few months, is release 2.0."

 

However, Tauscher cautioned that the process of determining which technologies should be removed from the USML would be a complicated one.

 

"What is the review process, once something is no longer a necessity to protect, to get it off the list, so that we can put the thing on that needs to be protected?" she said. "I think in the beginning, we realized that we had to protect x number of things. And then it became x-plus, and then x-plus, and then xx-plus. And you cannot protect everything for its life cycle. You can only protect it while it is important for national security." 

 

During the hearing, Sen. Benjamin Cardin (D-Md.) warned that U.S. national security ultimately could be compromised if U.S. regulations prevent American aerospace companies from competing in the international market.

 

"A lot of this technology growth is international in some respects," he said. "And if companies are prohibited from being engaged internationally, their viability is affected." 

 

Tauscher agreed that while it is important to favor national security interests, "we also need to create good-paying American jobs and have America be at the forefront of technology. And it's that sweet spot that we have to find, to make sure that we are absolutely protecting the national security items, but at the same time, we're cognizant that there's a world market for things that can be taken off the list, and that we have to then protect the new things that need to be protected."

 

In her written response to Lugar, Tauscher noted the State Department's export licensing process is less cumbersome today than in recent years.

 

"In the past, U.S. industry had some valid concerns regarding their competitiveness in a global market," Tauscher wrote. "In 2006, the average space-related export authorization took 76 days from submission to the Department of State to issuance of the authorization approval. In 2008, such approvals were averaging 23 days."

 

In his written questions, Lugar asked Tauscher if China's space program poses a threat to U.S. national security. Tauscher noted that China's January 2007 successful test of a ground-launched anti-satellite missile demonstrated the country's ability to attack satellites in low Earth orbit.

 

"This system is one component of a multidimensional program to limit and prevent the use of space-based assets by political adversaries during time of crisis or conflict," Tauscher said. "We believe that China should respond to international calls for a full explanation of China's intentions, including how China's development of anti-satellite weapons squares with its claims to be opposed to the militarization of space."

 

 

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SATELLITE FLEET OPERATORS FLYING ABOVE TROUBLED WORLD ECONOMY

 

By PETER B. de SELDING
Space News Staff Writer

 

PARIS — The principal satellite fleet operators continue to scan their markets for signs of a downturn. So far, they say, there are no indications of one.

 

Not all operators are alike — some have much more civil government and military revenue than others, and some have a few customers, such as television broadcasters, that account for a disproportionate share of their revenue.

 

Owners of satellite fleets nonetheless appear to paint a consistent picture of the overall market for C- and Ku-band transponders. The conclusion: The midterm forecast for a market growing at an annual rate of about 3.5 percent has not changed.

 

Ku-band is growing faster than C-band — 4.5 percent per year compared to 2.4 percent per year, according to one market analysis produced by SES of Luxembourg that forecasts market growth through 2016.

 

With overall growth viewed as rising only moderately, it may be no surprise that even the larger satellite operators are seeking joint ventures as a way to share capital costs.

 

Intelsat has been doing this for years with Sky Perfect JSat of Japan for the Horizons satellites and with Telenor of Norway for a satellite over Europe. In recent months Intelsat demonstrated a different kind of joint venture with South Africa investors for a satellite called New Dawn.

 

SES joined forces with its European rival, Eutelsat, to debut S-band mobile services in Europe to reduce the risks to each company. More recently, SES and start-up satellite operator YahSat of Abu Dhabi agreed to a joint venture, called YahLive, to market direct-to-home television service in the Middle East using a portion of the Yahsat-1 satellite, to be launched in 2010.

 

Eutelsat has recently deepened its collaboration with Egypt's Nilesat over development of Nilesat's 7 degrees west orbital slot in a deal that permits Nilesat to grow its business while waiting for its next satellite, and permits Eutelsat to further establish itself in the Middle East using available satellite capacity.

 

SingTel Optus of Singapore and Australia, and Chunghwa of Taiwan are furthering their long-standing collaboration to build the ST-2 telecommunications satellite.

 

In the same region, Asia Broadcast Satellite of Hong Kong entered into a deal with SingTel Optus under which the ABS-2 satellite, now under construction, will be co-owned and marketed by the two companies. Asia Broadcast Satellite, a one-satellite operator that reported $30 million in revenue in 2008, gets badly needed cash to finance its ABS-2 satellite. Measat gets needed additional capacity without having to finance the full construction and launch costs.

 

As has been the case for several years, the overall fixed satellite services provider business looks highly concentrated when viewed from a distance. SES of Luxembourg and Intelsat of Bermuda and Washington each has about a 25 percent share of the annual revenue in the sector, which in 2008 totaled around $9.5 billion. Eutelsat's 14 percent and Telesat's 7 percent mean that the top four companies together account for 70 percent of the annual business.

 

Still, the industry sees more new entrants than departures, despite the well-publicized difficulties of operators with fleets of just one or two satellites.

 

Companies viewed as troubled as recently as a year ago — ABS in Asia, Nilesat in the Middle East, Rascom in Africa, Satmex in Latin America — have found ways to survive, and in some cases even expand.

 

Meanwhile, few of the start-up operators, some started for purely political motivations — Venesat in Venezuela, Nigcomsat in Nigeria, KazSat in Kazakhstan and VinaSat in Vietnam, among others — have shown any willingness to withdraw from the business.

  

 

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SATELLITE TELECOM STARTUP TARGETS PENTAGON MARKET

 

By TURNER BRINTON
Space News Staff Writer

 

WASHINGTON — A startup company hoping to sell satellite communications bandwidth to the U.S. Department of Defense is seeking an upfront commitment to lease capacity that in turn would lure the private investment necessary to build and launch its spacecraft.

 

"We've contacted a number of potential investors who are all interested in financing this venture," said Craig Weston, chief executive of U.S. Space LLC of Dulles, Va. "We are not going to lack for investors once we land a contract."

 

U.S. Space was established by a group of former government and industry space officials to capitalize on the Pentagon's burgeoning demand for satellite bandwidth. The company was founded by Mark Albrecht, former executive secretary of the White House National Space Council, who also served as chief executive of International Launch Services; and Ed Horowitz, former chief executive of SES Americom, one of two companies that provide most of the commercial satellite capacity leased today by the military. Retired Air Force Lt. Gen. Michael Hamel, former commander of the Space and Missile Systems Center, is a member of the board.

 

U.S Space seeks to build and launch dedicated military communications satellites on short timelines using off-the-shelf technology. U.S. Space does not aim to replace the Pentagon's own satellites or the commercial operators that sell capacity to the military; rather, the company sees a niche for a so-called third leg to provide augmentation and surge capacity, said  Weston, a retired U.S. Air Force major general.  

 

The company's business model is different from most other commercial satellite operators in that the U.S. government would be the sole customer on each satellite, using dedicated military channels in frequencies such as Ultra-High Frequency and Ka-band. This will enable U.S. Space satellites to be placed in orbital slots reserved for the U.S. military; these satellites also would be compatible with existing military ground terminals, Weston said in a July 1 interview.

 

"The time right now is essential," Weston said. "We are involved in two major conflicts and we have standing commitments around world. At the same time, [the Defense Department] has had to cancel a major satellite procurement, T-Sat, and it is struggling to maintain coverage around the world. Not only is there a near-term shortfall, but the appetite is going to continue to grow in the future."

 

T-Sat refers to the futuristic Transformational Satellite communications system, which was intended to exploit Internet Protocol and laser-optical technologies to provide a dramatic leap in communications capacity available to the military. The program was canceled earlier this year due to concerns about its feasibility and cost.

 

Weston said only U.S. companies will be involved in the construction, launch and operation of U.S. Space's satellites. The company is partnered with several midtier satellite and launch services providers, including Orbital Sciences Corp., also of Dulles, but no specific spacecraft platform or launch vehicle has been chosen, he said.

 

The company is making its rounds through the Pentagon, having pitched the model to one of the combatant commands, two defense agencies and the Joint Staff, all of which have been enthusiastic about the proposal, Weston said.

 

A similar venture was started several years ago by Rockville, Md.-based Xtar LLC, which in 2005 launched an X-band communications satellite and bought an X-band payload on another satellite in hopes of selling the capacity to governments. But Xtar has struggled to win significant U.S. government business, although the company this year was selected to provide capacity to Pentagon users. 

 

U.S. Space will not launch a satellite without its full capacity being reserved ahead of time, Weston said. This likely would entail multiyear commitments by the Pentagon, which typically shies away from such arrangements with commercial satellite operators. 

 

Finding several hundred-million dollars in private financing in the current economic climate would be quite a trick, said Jim Cantrell, president of Strategic Space Development consultancy. But selling the Pentagon on a model identical to one that the established communications satellite operators have been unsuccessfully pitching for years would be even more impressive, he said.   

 

"They've identified an interesting opportunity, but I'm not sure there's a unique value proposition here," Cantrell said. "I know commercial operators are actively offering the military similar arrangements."

 

 

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