American Spirit :LOR
I missed where LOR wrote off the Globalstart investment. I thought they were still carrying it on their last balance sheet. I saw where they were not going to bail gobalstar out with more funds and that had a short term boost on the stock. I did find this article that says the same thing that LOR had written off the debt, but after the write off they still have 2.5 billion in debt and 300,000,000 in cash is that true or am I double counting the gobalstar debt yet. I also see that there was a preferred convertible recently done is that where the insiders bought or was it a true buy. Thanks in advance. I am very interested in this I just dont want to see it go under 2 hours after I buy VBG
Loral sees ongoing risks, debt trouble
TUESDAY, APRIL 03, 2001 4:42 PM
- Reuters
NEW YORK, April 3 (Reuters) - Satellite company Loral Space &
Communications Ltd. (NYSE:LOR) faces a bevy of threats to its operations,
including exposure from its stake in the troubled Globalstar partnership, a heavy
debt load and falling revenues from one of its core businesses.
And increased competition, as well as problems affecting some Loral satellites
already in orbit lengthens the shadow hovering over the company.
"If our business plan does not succeed, our operations might not generate enough
cash to pay our obligations," Loral warned in its annual filing with federal securities
regulators.
The New York-based satellite and communications technology provider has
extended the expiration date on offers to exchange convertible preferred stock so
that shareholders would have time to review the 10-K report filed on Monday with
the Securities and Exchange Commission.
Shares of Loral hit a new low on the New York Stock Exchange on Tuesday,
sliding almost 40 percent to $1.15. The stock has dropped from a high of $24 in
December 1999.
Loral ended 2000 with a net loss of $1.54 billion, or $5.20 per share. That was
more than six times wider than the loss of $247 million, or 85 cents per share,
reported in 1999.
The 2000 results included a $2.9 billion charge against earnings related to
Globalstar -- a partnership formed in November 1994 by Loral and cellular
telecommunications company Qualcomm Inc. (NASDAQ NM:QCOM).
Loral owns about 38 percent of Globalstar L.P.
Globalstar Telecommunications Ltd. (NASDAQ NM:GSTRF), the public Globalstar
entity, owns more than 40 percent of the business and Qualcomm and several
other companies own the remainder.
RUNNING RISKS -- DEBT, COSTS, CASH
Globalstar said it would stop making interest payments on its debt in order to save
cash. At the end of 2000, Globalstar had $1.45 billion in outstanding senior notes,
$500 million outstanding under a credit facility, $250 million in three-year notes
and $788 million of vendor financing.
A significant portion of that debt is owed to Loral, the company said. Globalstar
may seek bankruptcy protection if it cannot execute a restructuring plan, which
could complicate the status of Loral's equity interest in the partnership.
On its own, Loral closed 2000 with consolidated total debt of $2.5 billion. The
company had $394 million in cash and said it plans to use that capital to further
develop satellite technologies and hardware -- its stated strategy since
Globalstar's financial difficulties surfaced in January.
Loral said it may need to raise more cash in the capital markets to meet
obligations and execute its business plan, but noted it was unsure if those funds
would be obtainable.
"We are uncertain whether this source of cash will be available in the future on
favorable terms, if at all," Loral said in the filing.
The company expects to make "substantial" investments to realize returns in its
capital-intensive businesses. Loral sees significant expenditures to construct and
launch new satellites for its fixed satellite services business, for example.
Loral's debt is pegged at junk status by major credit rating agencies.
Moody's Investors Service rates Loral's senior unsecured debt "B3," its sixth
highest junk grade, with a stable outlook. Another agency, Standard & Poor's,
rates it "B-plus," roughly two notches higher, with a negative outlook. Moody's
said its ratings affected about $2.4 billion of debt and preferred stock as of March
1.
REVENUE DEPENDENCE
Revenue growth has also slowed, further cramping Loral's ability to pursue its
strategy of focusing on satellite technology and hardware.
The company said it depends on its satellite manufacturing and technology
subsidiary, called SS/L or Space Systems/Loral, for a large portion of revenues
and operating income. In 2000, those operations generated more than 80 percent
of Loral's total operating revenues.
But that unit generates a significant part of its income from only a few customers,
including Globalstar and some start-up companies.
"Our revenue and operating results would be hurt if completed or canceled
contracts are not promptly replaced with new orders," Loral said in its filing.
"Some of SS/L's customers are start-up companies, and there can be no
assurance that these companies will be able to fulfill their payment obligations
under their contracts with SS/L."
The SS/L unit's revenues in 2000 fell to $1.0 billion from $1.4 billion in 1999, Loral
noted, due to late start dates for some new satellite bookings.
The business also has been hit with a grand jury investigation, which may hurt its
ability to export products, Loral cautioned. SS/L could be accused of criminal
violations of export control laws arising from its employees' participation in a
committee formed to review Chinese findings related to a 1996 rocket crash in
China.
SS/L could be barred from export privileges without being convicted, Loral said. |
