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S&P Revises Iridium Down
New York - September 9, 1998 - Standard & Poor's today revised its outlook on Iridium Operating LLC/Iridium Capital Corp.'s (Iridium) ratings to negative from stable. The outlook revision reflects today's announcement that the commercial operation date of the Iridium satellite system has been delayed to Nov. 1, 1998 from Sept. 23, 1998. At the same time, Standard & Poor's affirmed its ratings on Iridium (see table below). However, if the Nov. 1 targeted date is not met, Iridium's ratings could be in jeopardy. Any further delays could adversely impact the expected materialization of subscriber demand and concomitant realization of positive cash flow by year end 1999. Furthermore, any further delay could impact certain milestones incorporated in the company's $1 billion secured bank facility. Total debt outstanding is about $2.3 billion. The delay of commercial operation is due to the company requiring additional time for service quality testing and improve processing of orders at the gateways. In the interim, commencing Sept. 23, the company is expected to use a controlled subscriber base of 2,000 who will test out the system and provide information on customer satisfaction. Iridium's current $1 billion bank facility supports its capital and operating requirements through year end 1998. Upon commercial operation of the Iridium system, this bank facility is expected to be replaced with a $1.7 billion facility. The new bank facility is expected to support the company's funding needs through year end 1999, when the company is anticipated to be cash flow positive. OUTLOOK: NEGATIVE Cash flow measures are expected to be weak through 1999 due to the start-up nature of the company. Any further delay in the commercial operation of the Iridium system could jeopardize current rating levels, Standard & Poor's said.
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