To: Sawtooth who wrote (6718 ) 8/26/1999 1:38:00 PM From: SafetyAgentMan Respond to
LORAL SPACE & COMMUNICATIONS LTD (LOR)
Closing Price as of 08/25/99: $19.188
* Company Description
* Investment Opinion: 08/20/99 at $18 1/4
Please contact your Financial Advisor for additional information.
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Company Description
Loral Space & Communication (LOR), headquartered in New York City, New York, is
a vertically integrated company that competes in the space industry. Its
primary areas of business are satellite manufacturing and fixed satellite
services (FSS). The company provides broadcast transponder leasing, domestic
and international corporate data networks, global wireless telephony,
broad-band data transmission, Internet connection, and digital audio radio
services. Loral also holds a 42% interest in Globalstar, a wireless satellite
telecommunications business.
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Investment Opinion: 08/20/99 at $18 1/4
We rate LOR a HOLD for the following reasons:
* Although we believe that Loral's core operating businesses are performing
well, and have solid growth prospects going forward. However, Loral's
investment in the mobile satellite telephony venture Globalstar (GSTRF) has
grown to represent over half of its enterprise value. There is a lack of
visibility regarding business segment performance due to uncertain development
costs and uncertain performance of new businesses such as GlobalStar and
Cyberstar . This lack of visibility causes us to maintain our cautious stance.
* We believe Globalstar continues to have considerable market risk while
requiring more capital to fund development. Although Globalstar (GSTRF) and
Iridium (IRIDQ) are different types of satellite systems, the recent
difficulties experienced by Iridium in adding subscribers has made us question
the size of the actual market for mobile satellite telephony services, reducing
visibility of future performance. Loral has used its credit quality to
guarantee $500 million in debt and did not provide further direct investment in
GSTRF. There should be additional Globalstar financing requirements, however,
these will likely be met by vendor financing arrangements, the sources of which
remain nebulous at this time, though, undoubtedly, in part by Globalstar
suppliers. With Loral guaranteeing Globalstar's new debt, the company is
shouldering more of the risk than the other partners. We believe the risk
reward of this investment is not in favor of Loral and we continue to remain
cautious on Loral shares.
* Cyberstar, Loral's broadband satellite system, is one of their major
priorities. This system is still in development, nevertheless, LOR believes
that it is the key for long-term viability as it represents a large market
opportunity much larger than Globalstar's market. They believe that there is
the likelihood that many of today's very lucrative satellite based private VSAT
networks will eventually be folded into tomorrow's broadband systems. LOR has
positioned itself to be the first to the market and the lowest cost system.
Prudential Securities Incorporated and/or its officers or its employees
may have positions in any security of this issuer.
