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S&P cuts Loral Space & Communications
Thursday September 19, 4:01 pm ET
(The following statement was released by the rating agency)
NEW YORK, Sept 19 - Standard & Poor's Ratings Services said today that it lowered its senior unsecured debt rating on Loral Space & Communications Ltd. (NYSE:LOR - News; Loral) to triple-'C'-minus from triple-'C'-plus and its senior unsecured debt rating on the company's wholly-owned subsidiary Loral Orion Inc. to triple-'C'-plus from single-'B'. These downgrades were based on concern about Loral's liquidity and weak customer demand in the company's satellite leasing and manufacturing businesses.
Standard & Poor's also lowered its corporate credit rating on Loral to double-'C' from single-'B' and its preferred stock rating on the company to single-'C' from triple-'C', and placed the ratings on CreditWatch with negative implications. These rating actions follow the company's commencement of an offer to exchange cash and common stock for each share of its series C and series D preferred stock.
Standard & Poor's considers the completion of the exchange offer, which represents a deep discount to the liquidation preference of the existing preferred stock, tantamount to a default on the preferred stock issues. If the exchange is completed, the corporate credit rating on Loral will be lowered to 'SD', and the preferred stock rating will be lowered to 'D'. Subsequent to completion of the exchange offer, assuming no further unexpected developments, the corporate credit rating will likely be raised to triple-'C'-plus, reflecting the company's still heavy debt burden and weak business conditions.
"Although successful completion of the exchange offer will improve Loral's balance sheet and modestly help cash flow by reducing dividend obligations, the offer could consume up to $22 million in cash if all preferred stock is tendered. Loral's liquidity will remain strained, and the company still faces financially much stronger rivals in the competitive satellite leasing and manufacturing businesses," Standard & Poor's credit analyst Eric Geil said.
Loral expects to have roughly $100 million in cash and borrowing availability at year-end 2002, not accounting for cash used in the exchange offer, down from $180.7 million at June 30, 2002. Standard & Poor's is concerned that the company could exhaust its remaining liquidity in 2003 given the potential for continued industry weakness.
Resolution of the CreditWatch listing will follow completion of the preferred stock exchange offer. A complete list of the ratings is available to RatingsDirect subscribers at www.ratingsdirect.com, as well as on Standard & Poor's public Web site at www.standardandpoors.com under Ratings Actions/Newly Released Ratings.
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· NYSE Approves Listing of Loral Common Stock in Connection With Preferred Exchange - Business Wire (Tue Sep 10)
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