Gilat Satellite Networks Ltd. announced Sept. 27 that York Capital Management has exercised its option to convert all of its $70.4 million loan, plus accrued interest of about $1 million, into 10.6 million shares of Gilat.

After the conversion, Gilat’s outstanding shares will increase from roughly 23.2 million to about 33.8 million shares. York will own 11.1 million shares, which includes about 500,000 shares purchased on the open market in May.

Following the conversion, Gilat will have reduced its total debt balance from $125 million at the end of September 2005 to approximately $46 million as of Sept. 27. As a result, Gilat’s shareholder equity will increase by $68.1 million.

“York’s decision to shift its position from a debt holder to a shareholder is a strong vote of confidence in Gilat and significantly strengthens Gilat’s balance sheet,” Amiram Levinberg, Gilat’s chairman and CEO, said in a statement.