Maurice:
wiping the debt is a great idea if you are the one who can control the situation and pick up the assets for a low price.
But the SPs do control the situation and they are the only ones, in reality, that would pick the asset up at a low price. It's clear (to me at least) that by 1Q01, G* will still be in pathetic shape; maybe it'll have 75,000 subs by end of Q100. That means a few things: (1) bank covenants will be in default and (2) break-even still is not within sight. Imo, no one besides the SPs will put significant money into G* at that point; so if they don't do it, G* goes into BK. Loral doesn't have the funds or the ability to inject enough cash into G* to make a meaningful difference.
So, if they choose, the SPs can push G* into BK with their inaction.
Now, who would buy G* in BK? First, I think that the SPs would have a prepackaged deal ready for the bondholders / BK court so that they would buy the assets quickly and give the bondholders $.20 on the dollar and equity. That removes G* from BK quickly, pays the bondholders something and prevents an auction. All parties are happy.
Could G* receive interest from other parties in BK? Anything is possible, but don't forget that the SPs, not G*, own the ground stations and have exclusive rights to G*. Who in their right mind will buy something without the support of the GW owners? Probably no one.
The primary thing that prevents me from dumping my remaining G* shares is that Loral is a big loser (at least in appearance; economically, they may be better off) in the above scenario and, as managing partner, may be able to prevent it. But Loral also may choose to cut its losses.
Interesting stuff. |
