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Technology Stocks : Loral Space & Communications -- Ignore unavailable to you. Want to Upgrade?

To: Valueman who wrote (2827)	5/2/1998 12:25:00 PM
From: dougjn	Read Replies (2) \| Respond to of 10852

Valueman, let me ask you to take your best guess on something. Suppose that G* performs right in line with Readware's projections, which as I understand it, you think are reasonable. What is Gstrf going to do with all its mountains of cash? I guess the first question is, who is expected to build the second constellation of LEOs? I assume it's the partnership, rather than the publicly traded entity holding 20% of the partnership. After all, Lor is going to want to be cut in big time, and it's got a partnership stake, rather than shares in Gstrf. So the partnership, on the strength of its cash flow from G1 and the prospects for G2 floats a bunch more debt, perhaps no longer junk bonds, and the partners kick in some equity from their cash flow from the partnership. Gstrf does so as well. Unless the equity required for the new constellation will absorb all the cash flow beyond debt service, which I rather doubt, there's still gonna be free cash flow from the partnership. And even if it is all plowed back into G2 for a while, it won't be for too long. I assume one of the reasons for the partnership structure, rather than having all of Loral's partners in G simply own shares in a corporate entity, was the expectation that the partners were going to be getting free cash flow from the partnership at some point in the future. For that purpose a partnership is much more tax effective. So Loral uses its free cash flow to finance more data in the sky, etc., Qualcomm does its thing, Alcatel its, Airtouch its, etc. What does the publicly trading corporate entity called Gstrf, which holds 20% of the partnership, use its free cash flow for? Because at least at the moment, G* is really sort of a public ownership vehicle, period. It doesn't really do anything. The partnership does, as managed by Loral. Does Gstrf turn into a dividend cash cow? That would be pretty tax ineffective. Bernard Schwartz must think whatever it is, it will be good, because he used a lot of his own money to buy into Gstrf in the high 40s a few months ago. Unfortunately, he may not be at the helm when this issue really comes front and center, however. Aside from woolly future gazing, this question actually has some bearing on allocating dough between Lor and Gstrf to my mind. Ok, ok, I'm counting chickens. But it's still useful to try to figure out for best case planning purposes. Regards, Doug