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

To: djane who wrote (4861)	5/24/1999 12:21:00 AM
From: djane	Read Replies (1) \| Respond to of 29987

NYPost. EVEN A DOD BOOST MAY NOT STOP DECAY OF IRIDIUM'S ORBIT By JOHN DIZARD TRUE pioneers pay no attention to terrible risk or the whining of mere accountants. That's true of lunatics as well. The trick is to distinguish between the two groups, since both have access to the capital markets these days. Among the pioneers active on Friday were buyers of stock in Iridium, the go-anywhere satellite phone company. IRID stock went above $10 a share, which gives it a market cap of $1.5 billion. That's up from a recent low of around $8. At the same time, the company's bonds are trading for 20 cents on the dollar, which means the bond market believes the company will file for bankruptcy in August, after it misses a coupon payment in July. But the Iridium bulls were willing to put faith in the company's CFO, Leo Mondale, who was quoted in Business Week as saying, "I don't think bankruptcy is a viable alternative ... We are not in as desperate a situation as people would paint." They may not be, but it's not obvious to the non-pioneering observer. Iridium last reported having around 10,000 subscribers willing to pay $3,000 for a go-anywhere phone and $5 a minute to use it. The company has $625 million of debt guaranteed by Motorola, $1.4 billion of junk bonds, and $800 million in bank lines that aren't fully drawn. That's a lot of claims ahead of the equity. In fact, it's the biggest disparity between the market value of public equity and that of debt ever recorded by my friends in the vulture buyer/short-selling community. But the bottom feeders were not happy on Friday. "I can't find any more stock to sell short," said one, in despair. "I found some put options for sale, but the premium was so high, it was equal to doing a short sale at $8 a share, which is also pretty extreme." The whisper in the telecommunications community has been that the U.S. military would bail out Iridium. The Pentagon has promised to be one of the biggest customers of the Motorola-backed company, and has built its own ground station to get direct access to the system. The interesting aspect of Iridium from the military's point of view is that the satellites don't need facilities on the ground to make the phones work. Given that the military often is in places where the local authorities are unfriendly to the point of being bad hosts, this is an advantage. An expensive advantage, since the satellites also have to have switching capabilities on board. "It's the greater-fool theory," says a Washington telecom source of mine. "Since commercial users think it doesn't make any sense, sell it to the military." That could work in terms of keeping the satellites up in space and turned on, but there isn't any reason why the military couldn't just remain a discount customer of the bankrupt company. The Pentagon would have to pay enough to cover the annual cost of maintenance, operations, and the launch of replacement satellites, and that would be kind of expensive - somewhere north of $750 million a year. The company is depending on the "gateway providers" - phone companies around the world who connect it to the land networks - to put the arm on the company's lenders. But the Pentagon's interest in Iridium is its potential independence from these gateways. In a word, the physical plant may well be saved by Uncle Sap, but it is hard to see where the lenders get out with much if anything. The equity holders, including Friday's buyers, are likely to lose their $1.5 billion. dizard@nypost.com New York Post®, nypostonline.com™, nypost.com™ and newyorkpost.com™ are registered trademarks of NYP Holdings, Inc. Copyright 1999 NYP Holdings, Inc. All rights reserved.