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Technology Stocks : America On-Line: will it survive ...?
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To: vegetarian who wrote (5828)11/12/1997 11:43:00 AM
From: PAL  Read Replies (1) of 13594
 
The issuance of subordinated convertible debentures of # 350M due in 5 years shows that AOL is in financial bind:

1. working capital is big negative to the tune of $ 183M
2. Interest for the debentures will run $ 14M/ year
3. If there is no conversion by the note holders (getting a measly 4%), the AOL has to set aside $ 70M every year to pay off the debentures. At that time AOL might float more notes to pay previously issued. Just like The US government (without the safety of treasury bonds).
4. Woking with Sony to give 50 hrs of free AOL connection on every music CD Sony issues. Yet no mentioned how much AOL will have to pay Sony. It is unlikely Sony is paying AOL since in that case (no pun intended) AOL will trumpet the revenues that can be heard in Mongolia.

Brian Oakes, what is your spin? Still reiterate AOL as the good buys?
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