Credit Implications Positive for LMT's $1.95B Tender Offer.

Business Editors

NEW YORK--(BUSINESS WIRE)--Nov. 30, 2000

Lockheed Martin Corp. (LMT) commenced a tender offer on Nov. 28, 2000 to purchase up to $1.95 billion in principal amount of six outstanding debt issues. Each tender offer will expire on Friday, Dec. 8, 2000, unless LMT extends, amends or terminates the purchase of the debt securities specified in the tender offer. These debt issues include LMT's 7.45% notes due 2004; 7.625% notes due 2004; 7.95% notes due 2005; 9% notes dues due 2003; 9% bonds due 2022 and 9.125% bonds also maturing in 2022.

Fitch intends to monitor the progress of LMT's tender offer over the near-term and will review the impact of the debt repurchase on LMT's leverage posture following its completion. Fitch recently affirmed the 'BBB-' rating on Lockheed Martin's senior notes and the `F3' rating on Lockheed Martin's commercial paper programs, both 3(a)3 and 4(2). LMT's Rating Outlook is Stable.

The implications on LMT's credit profile, assuming a successful tender offer, are positive. Fitch projects annual interest expense savings of approximately $155 million during fiscal year (FY) 2001 and FY 2002. Fitch also expects LMT's leverage ratio, as defined by total debt to EBITDA, to vary between 3.2 times (x) to 3.5x by FY 2001 from 4.5x at Sept. 30, 2000. LMT's debt level will decline to about $9 billion following the tender offer and retirement of $825 million of maturing debt in 2001. Fitch projects LMT's EBITDA for 2001, adjusted for the divestiture of Aerospace Electronics Systems (AES), to approximate $2.6 billion. LMT's ability to generate additional free cash flow provides flexibility for the company to reduce debt further over time.

In conjunction with the tender offer, LMT will record a nonrecurring charge during the fourth quarter 2000 to complete the debt repurchase. The company will use a combination of available cash balances and the proceeds from the sale of the Aerospace Electronics Systems (AES) segment in order to complete the debt buy back. LMT sold AES to BAE Systems North America for $1.67 billion in cash and closed the transaction on Nov. 27, 2000. AES, comprised of Fairchild Systems, Sanders and Electronics & Communications, has annual sales of approximately $1 billion. LMT also successfully closed the sale of Control Systems to BAE Systems North America on Sept. 25, 2000 for $510 million.

Remaining divestiture candidates include IMS, LMT's state and local government service business and two small environmental businesses, Energy Technologies and Retech. Fitch expects these divestitures to be completed sometime during 2001 with net proceeds applied towards debt reduction.

LMT's current liquidity position includes approximately $3.6 billion of cash and complete availability under $3.5 billion of bank credit facilities which are used to support both 3(a)3 and 4(2) commercial paper programs. The company's debt-to-capital ratio was 62.6% at Sept. 30, down from 65.3% at fiscal year-end 1999 as a result of LMT being ahead of schedule in free cash flow generation. Following the completion of the tender offer, LMT's net debt-to-capital ratio will approximate 50% or below, in-line with management's target level.

Lockheed Martin, founded in 1926, is the largest U.S. Defense contractor with over $50 billion in defense contracts awarded during the last four years. LMT, a leading system integrator in aerospace, defense and technology services, was formed in 1995 through the merger of Lockheed and Martin Marietta. Sales in 1999 were $25.5 billion and by segment were as follows: 43% Systems Integration; 23% Space Systems; 21% Aeronautical Systems; and 9% Technology Services. The U.S. Government was responsible for 71% of LMT's FY 1999 revenues. The company's current market capitalization is approximately $15 billion.