Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Microcap & Penny Stocks : Globalstar Telecommunications Limited GSAT -- Ignore unavailable to you. Want to Upgrade?

To: pcstel who wrote (20658)	12/29/2000 3:57:04 PM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 29987

PCSTEL--At any time that G* defaults on a bond payment or a loan payment, it can be forced into bankruptcy. Also, at any point at which liabilities exceed assets, and with no possibility of being able to cover the liabilities in the short run, G* can also file for bankruptcy on its own initiative. Thus, there are several different scenarios for filing bankruptcy here, not just violation of loan covenants. As I have noted in several earlier posts, it is likely that Schwartz would not be in favor of bankruptcy because then his own Loral ownership suffers, since Loral owns about 40 percent of G* equity. Likewise, but to a lesser extent, QUALCOMM would also be forced to write off its approx. 6 percent investment in G* equity. Thus, bankruptcy is not a foregone conclusion here, as it might be for other companies where the Chairman may have less financial interest in the outcome. If bankruptcy occurs, then the stockholders will get virtually nothing, and that includes LOR and QCOM as well as many individuals who own the stock. Bonds and senior debt ALWAYS get preference before stock. If the company were liquidated, it would be up to the bond trustee to approve a satisfactory agreement on behalf of the bondholders. The company cannot simply decide it will pay bondholders, say, ten cents on the dollar. That is up to the trustee and the courts. It is also not up to the company to decide to give bondholders some kind of stock in lieu of continuing to make payments on the bonds. If the bondholders refuse such an agreement, then liquidation is often the only other alternative. That's where the value of the satellite assets comes in, and is why a company like Vodafone might like to buy those satellites for, say, 50 cents on the dollar. Again, that's why, if people understood the rights of the bondholders better, they might be inclined to agree that the bonds are worth considerably more than 10 cents on the dollar, even if the company defaults on the interest payments. The down side of all this is that those holding only small amounts of the bonds have to take whatever they are offered, since it would not be cost effective to hire one's own lawyer. Those with about $1 million face value in the bonds would have an opportunity to refuse an offer and dictate their own, subject to the opinion of a bankruptcy court. I reiterate my main point: The stock looks pretty awful. The bonds are a better deal than one might think. Art