Pierre: <I don't think Q* or LOR or any of the partners for that matter are trying to steal this system from the equity holders by BKing it. I think Maurice's view on this one is more correct - too much downside for all involved whether "pre-pack" or "structured" or straight BK. If this thing shows some life it'll get funded.>
First of all.. The amount of dilution that would take place to secure the kind of continued funding that G* needs would be.. Well "Horrendous".. 400 million for the next year alone!! LORAL DOES NOT HAVE THE MONEY, OR THE ABAILITY TO RAISE ANYWHERE NEAR THAT KIND OF MONEY!!
First of all, the SPECULATION (theory) that I have revealed is the path of least resistance, and the least dilutive to the GSTRF common..
Some others preach a COMPLETE EQUITY FOR DEBT SWAP among the debt holders Qualcomm,Loral, and the Bondholders.. In this scenario, the Common Holder ends up with nothing.. (or almost nothing), In addition, additional funding must be injected into the company, Maybe 160 million.. for operational cash burn for the next two years since it would be Debt Free!! So all of this will require massive dilution when Globalstar equity price is @ .50 a share.. Not exactly the point that you would want to preform "massive dilution" if you are a holder of the common..
Under my Speculation.. Loral states that they will call the 500 million Credit Facility on March 31, 2001.. Sometime in January.. due to loan covenant violation.. (Notice Loral still has not clarified there position on this covenant). The Bondholders know there will be little cash left on March 31, 2000, and the value of the Globalstar constellation is Valueless (or near so, by the outcome of ICO and Iridium). Bernie pitches the deal 2 years equity for cash bond interest payments. The bondholders accept (because they get a "Goose Egg" if they don't.. Globalstar has another 2 years of "runway" operating in a near "debt free" (cash wise) environment.. The bonds become worth more than a dime, the equity rises to a value of more than $1. And the dilution of future bond payments, dividends on the preferred are paid at a HOPEFULLY higher equity price which prevents "The Horrendous" dilution that would take place in a straight "Debt for Equity" swap with GSTRF trading @ .50 cents.. In addition, as the value of GSTRF equity rises passed $4.5.. Then G* can continue selling the Tranches.. (There is still 60 million outstanding) Which with the cash on hand at the end of Feb. would almost get them through the next two years of operation.. There would still be dilution, but would be much less than a "Straight Debt for Equity Swap"..
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