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

To: Valueman who wrote (6087)	5/8/1999 11:49:00 PM
From: RMiethe	Read Replies (2) \| Respond to of 10852

The $265 million will be remitted to Loral Space and Comm, not Orion. What LOR can do is build a new GEOsat for Orion, and by that compensate Orion for the loss of the GEOsat with the replacement GEOsat without actually giving them the cash from the insurance proceeds. Not quite certain that LOR becomes cash poor if with in excess of $820 million, even given a $100 million quarterly burn rate for Globalstar, if it raises $600 million for Globalstar and gets vednor financing for the balance between inaugaration of service and actual bookings, it ends up with, in July, over $1.4billion between LOR and Globalstar. Then, if Globalstar starts in September, gets $45 million from its resellers (which it statutorily gets in the 4th qrtr,) lands 55,000 customers by year end, I don't see how LOR becomes cash poor by any means-- unless Globalstar is a total flop. If it doesn't have some 55,000 users by the end of December and a good forward looking demand rate, then I could see your concern for worrying about the burn rate. On the financials after start-up, everything becomes extremely complicated, as poster Rocket Scientist has pointed out, because of how Globalstar expenses once it begins service. I don't think anyone just yet has a handle on that. If the subscriptions come in as is being suggested, I'll gladly leave the expensing problems to Globalstar. Vendor financing structures have already been set with the partners. Some have been cynical on that, but it has been set on an agreed upon time basis. This tells me that the resellers do not believe they will have to put up any cash beyond what Loral Globalstar raises ($600 million). It was done fairly quickly--It's easier to agree upon financing when you don't think it will be an issue. Vendor financing agreements preclude further capital markets borrowing, and BLS on the CC did state that this upcoming tranche of $600 million would be the last time Globalstar would need to go to the markets, assuming three good Delta II launches. From analysis I read last November the whole borrowing after the Zenit disaster would approximate $830 million-- when Wall Street was saying it would be $400-500 million. The $830 million number turned out to be just about right, and the analysis as updated two weeks ago puts that as the total cost of all borrowing given recent indications from resellers about initial interest. I am a bit puzzled about the 35,000 initial phone shipment, and then moving up to 100,000 in total three months later. I would prefer 100,000 phones ready from the first day. Then again, the resellers seem to have suggested this distribution rate, and they are better at this than I am. TESAM and Elsa are not prepared to ship phones to regions until their local partners give them a number to ship, and it is those two telcos that have to be watched as far as the ramp-up rate goes. I am not too concerned about Network Vodaphone, Air Touch, or China Telecom, since they seem to have given favorable indications. Vodaphone has stated that it sees a satellite phone system as saving it hundreds of million of dollars in land cell infrastructure costs, so that gives an idea where they are going with Globalstar.