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Globalstar, Inc. (NASDAQ: GSAT) intends to offer $135 million of Convertible Senior Notes due 2028, with a $15 million overallotment.  Merrill Lynch and Deutsche Bank Securities Inc. will act as joint Book-Running Managers for this offering.

The Notes will be convertible into Globalstar common stock, cash, or a combination, at Globalstar’s option.   The interest rate, conversion rate, conversion price and other terms of the Notes will be determined at the time of pricing of the offering.

Holders of the Notes may require Globalstar to repurchase the Notes if Globalstar is involved in certain types of corporate transactions or other events constituting a fundamental change (in other words, a put feature).

Globalstar also intends to enter into a share lending agreement with Merrill Lynch to lend shares of its common stock to the share borrower.  Globalstar will enter into an underwriting agreement with Merrill Lynch and the borrower so that the share borrower can sell the borrowed shares in an underwritten registered public offering and will use the short position resulting from the sale of such shares to facilitate the establishment of hedge positions by investors in the Notes.

Globalstar expects that approximately 15 to 20 million of the loaned shares will be initially offered in a fixed price offering, with the remaining shares subsequently offered and sold from time to time at prevailing market prices in various transactions.

Globalstar will not receive any of the proceeds from sales of borrowed shares, but it will receive a nominal lending fee from the share borrower.

For some reason, this sounds like loaning out your house when you plan to sell it.  This isn’t the only time that deals have been structured like this to accommodate collars and to generate lending income.  But it will sure be crucial to see what these terms end up being.

We frequently discuss restructurings, insider activity, activist investor trends, IPO’s, back door plays into IPO’s, SPAC’s, spin-offs, and more on our open email distribution list.

Jon C. Ogg
April 1, 2008

Jon Ogg produces the Special Situation Investing Newsletter and he can be reached at [email protected]; he does not own securities in the companies he covers.