S&P cuts Orbital Sciences ratings
(Press release provided by Standard & Poor's)
NEW YORK, Nov 17 - Standard & Poor's today lowered its ratings on Orbital Sciences Corp. (see list
below).
All ratings are also placed on CreditWatch with "developing" implications, which means ratings could be raised, lowered or affirmed.
The actions reflect concerns about the Dulles, Va.-based company's near-term liquidity, and a need to inject a material amount of equity to restore financial flexibility. Capital requirements will remain high as management continues to address numerous growth opportunities. Also, operational shortfalls in a major startup data communications unit are requiring significant additional investment. Failure to bolster financial flexibility near-term could trigger an additional ratings downgrade
However, management has a record of financial conservatism, and may fund requirements through a mix of debt and equity to preserve financial flexibility. A substantial infusion of equity could result in a modest improvement in credit quality.
The firm develops, manufactures, and operates a range of space-related products, including launch vehicles, satellites, sensors, and electronics. Activities incur technological and market risk. Orbital Sciences has successfully demonstrated key technologies, but occasional launch failures highlight technical risk.
The firm's space-related manufacturing and launch operations are performing satisfactorily, and healthy backlogs signal good ongoing demand. However, two major projects, with commercial viability yet to be demonstrated, are underway to serve the rapidly growing commercial space market.
ORBCOMM Global, L.P. (triple-'C'-plus/CreditWatch Neg/--), a global, satellite-based data communications network, began service in 1998, but operations are developing more slowly than expected. A partnership with Teleglobe Inc. jointly funds development of ORBCOMM, and the unit's investment requirements are significant because of operational shortfalls. Orbital Imaging Corp. (triple-'C'-plus/Developing/--), about 54% owned,
provides satellite-based imaging of the Earth's surface. Modest revenue generation began in 1998, and funds on hand support system expansion over the intermediate term.
Orbital Sciences has aggressively expanded operations through acquisitions and investments, increasing the firm's debt burden. Furthermore, internal cash generation is modest, so development of commercial ventures and additional business initiatives could require substantial external capital over the near term.
Standard & Poor's will meet with management to review the company's strategic plans, related cash needs, and measures to be taken to raise capital.
RATINGS LOWERED AND PLACED ON CREDITWATCH WITH DEVELOPING
IMPLICATIONS
TO FROM
Orbital Sciences Corp.
Corporate credit rating B+ BB
Subordinated debt rating B- B+
Bank loan rating B+ BB
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