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Technology Stocks : Broadcom (BRCM) -- Ignore unavailable to you. Want to Upgrade?

To: MU Lation who wrote (4543)	11/8/2000 10:57:44 PM
From: Stoctrash	Respond to of 6531

Ask your self, Mr. MU, ...who's gunna buy the bulk of all them super duper BRCM chips?? You, me, or the dudes listed below? I didn't make this up. thestreet.com (snips) His list includes CLECs (competitive local exchange carriers), data carriers, satellite ISPs (Internet service provider), Web hosting, wireless, cable, radio and broadcasting companies. A tough-minded credit analyst, Suria focuses less on the "growth story" that has attracted stock investors to these companies and more on whether they have the cash flow to support the interest and debt burdens they have taken on in the past four years. In his view, many of the New Era companies will not make it, and stock investors in those companies will lose everything. (In a debt-induced restructuring -- or bankruptcy, to use plain English -- debt holders have to be paid 100 cents on the dollar before equity holders get a penny. Recent restructurings in this sector have paid bond holders closer to 50 cents on the dollar, and shareholders have received zip.) The bond markets are effectively closed to many of these questionable credits. Many of the companies lack the positive cash flow to service their financial obligations. And the stock market is no longer in a mood to provide low-cost financing. This is breathtaking stuff. It's understandable why Lehman might not want such rough talk widely disseminated. Suria began by explaining that the debt taken on by telecom companies is unprecedented. From 1996-2000, the high-yield (junk) market raised $240 billion in debt for the sector. To put that into perspective, he said, the entire junk bond market raised only $160 billion between 1983 and 1990 during Drexel Burnham Lambert's heyday. Telecom debt is 150% of all the debt raised in the bad old 1980s. The debt on average carried an 8%-9% yield to maturity. Today, fears of slowing revenue, massive cap-ex ahead and negative cash flows, have crushed those bonds. Many of the new companies would now have to pay upwards of 15% for money if they were to come back to the debt markets for more money. Of course, Suria noted that the market is closed to many of these companies no matter what interest rate they might be willing to pay. "In the aggregate," he said on the call, "the debt markets have started saying, if you need more money just to pay me back the interest on the money you already borrowed from me, it's not going to happen." He downplayed expectations that better-financed telecoms will come in soon to buy troubled companies. Why not? In part, because even the big boys like AT&T (T:NYSE - news), WorldCom (WCOM:Nasdaq - news), Sprint (FON:NYSE - news), Global Crossing (GBLX:Nasdaq - news) and the old Baby Bells are feeling the credit pinch. Perhaps more importantly, he said, why should they come in now to buy a competitor's plant and equipment for enough cash to pay off bondholders when they could build it themselves or get it for less in a bankruptcy proceeding down the road. The Worst Is Yet to Come <snip>