COMSAT & Unit Put on S&PWatch; Re: Lockheed Acquis.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 9/22/98-- Standard & Poor's today placed its long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. ratings of COMSAT Comsat: see Communications Satellite Corporation; communications satellite. (COMSAT General Corporation, Bethesda, MD) Formerly Communications Satellite Corporation, COMSAT was a private company that was created by the U.S. Corp. (COMSAT) and its funding organization, Comsat Capital I on CreditWatch with negative implications (see list below). Standard & Poor's also affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. its commercial paper and short-term corporate credit ratings on COMSAT and its preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. rating on COMSAT Capital I (see list below). At the same time, Standard & Poor's affirmed its ratings on Lockheed Martin For the former company, see . Lockheed Martin (NYSE: LMT) is a leading multinational aerospace manufacturer and advanced technology company formed in 1995 by the merger of Lockheed Corporation with Martin Marietta. Corp. and its units. The outlook remains negative. The CreditWatch placement reflects the announcement that Lockheed Martin plans to acquire COMSAT for $2.7 billion. It is anticipated that COMSAT's ratings will be lowered to the triple-'B'-plus corporate credit rating of parent, Lockheed Martin, following completion of the first phase of the acquisition. COMSAT provides international satellite communications services and digital networking services and technology and has about $490 million of total debt and commercial paper outstanding as of June 30, 1998. The merger of the two companies will be completed through a two-phase transaction. In the first phase of the transaction, Lockheed Martin will make a cash tender offer to purchase up to 49% of the outstanding common stock of COMSAT at a price of $45.50 per share with a total estimated value of $1.3 billion. This phase of the merger must first be approved by the FCC (1) (Federal Communications Commission, Washington, DC, www.fcc.gov) The U.S. government agency that regulates interstate and international communications including wire, cable, radio, TV and satellite. The FCC was created under the U.S. as well as the shareholders of both companies. The approval process is expected to be completed in six to nine months. Phase two of the transaction will be accomplished through an exchange of Lockheed Martin common stock for COMSAT common stock at a ratio of 0.5. This part of the transaction will require enactment of federal legislation to remove the existing restrictions on authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: carrier ownership of COMSAT voting stock Voting stock The shares in a corporation that entitle the shareholder to vote. voting stock Stock for which the holder has the right to vote in the election of directors, in the appointment of auditors, or in other matters brought up at the . The combination with COMSAT would enhance Lockheed Martin's competitive position in the commercial, space-based telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. industry. The impact on Lockheed Martin's financial profile will not be significant, especially since the firm anticipates funding the cash portion of the tender offer through monetization Monetization The securitization of the gross revenues of a contract. of part of its portfolio of equity securities. Lockheed Martin's ratings reflect an extremely strong business risk profile as the largest defense contractor Noun 1. defense contractor - a contractor concerned with the development and manufacture of systems of defense armed forces, armed services, military, military machine, war machine - the military forces of a nation; "their military is the largest in the region"; in the world, offset by aggressive debt leverage. Debt to capital is very high at about 70%, but, over the next three years, substantial cash generation is expected to be devoted to material debt reduction. Consequently, Standard & Poor's expects funds from operation to debt to recover to a mid-30% area from a high-teens level currently. OUTLOOK (Lockheed Martin Corp.): NEGATIVE Excellent program diversity, together with management commitment to reduce financial risk, support current credit quality. However, while free cash flow should be considerable, management failure to achieve ambitious debt reduction targets could result in lowered credit ratings, Standard & Poor's said. -- CreditWire -0-
RATINGS PLACED ON CREDITWATCH WITH NEGATIVE IMPLICATIONS
Rating
COMSAT Corp.
Corporate credit rating A-
Senior unsecured debt A-
COMSAT Capital I
Corporate credit rating A-
OUTSTANDING AFFIRMED RATINGS
Rating
COMSAT
Commercial Paper A-2
Short term credit rating A-2
COMSAT Capital I
Preferred Stock BBB+
Lockheed Martin Corp.
Corporate credit rating BBB+
Senior unsecured debt BBB+
Commercial paper A-2
Martin Marietta Technologies Inc.
Senior unsecured debt* BBB+
Lockheed Corp.
Senior unsecured debt* BBB+
Loral Corp.
Senior unsecured debt* BBB+
*Gtd. by Lockheed Martin Corp.
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