ORBITAL WILL REDUCE DEBT $100 MILLION BY UNLOADING UNITS
Orbital Sciences plans to reduce debt $100 million with proceeds from sales of subsidiaries as “refocusing” continues, spokesman said. Company plans “back-to-basics” approach that includes concentration on core business in space technology, satellites, rockets, related systems (CD April 18 p6), spokesman said: “There are products Orbital has had over the last decade that have operated profitably. We plan to go back to that.” Orbital believes each of moves will help improve bottom line, which CEO David Thompson at shareholders meeting May 18 (CD May 21 p9) admitted was “disappointing.” Plans were announced in 10K filing with SEC May 15 that were outlined in quarterly report. Meanwhile, NASA Orbital announced Wed. it had landed $53 million NASA contract for launch vehicle program and space architecture studies.
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Changes are being made because “liquidity is and has been constrained,” company admitted in SEC filing. To meet operating and capital requirements, Orbital also is expected to pull in another $111.1 million from sale of MacDonald Dettwiler subsidiary in deal that’s expected to close by May 31. Company also is negotiating to sell Magellan Corp. and Navigation Solutions in combined transaction, filing said. Sale should take place by end of 2nd quarter, spokesman said.
Orbital may increase stake in former Orbcomm spinoff to 40% by issuing $6.5 million of shares to current holders of Orbcomm debt and offering other noncash incentives, spokesman said. Orbcomm transaction “must go through entire process” because bankrupt company has been purchased out of bankruptcy by new investment group, Orbital spokesman said.
Despite progress, Orbital still faces several financial hurdles, including legal disputes with strategic partners that could have direct impact on company. Primary debt facility with international syndicate of banks provided $115 million, which remained outstanding at end of first quarter. In Feb., Orbital also entered into $30 million 364-day loan with bank syndicate. At same time, Orbital amended and restated primary facility in order to modify prepayment terms, expand collateral provided to banks and change expiration date to July 2002 from Dec. 2002. Orbital’s borrowings now are collateralized by accounts receivable, intellectual property, inventory, equipment, real estate and assets, including stock in subsidiaries, filing said. Company also defaulted under several financial covenants during first quarter, but defaults were waived by bank group last month. New debt facility requires Orbital to reduce outstanding balances by applying 100% of first $50 million in net proceeds from any asset sale, 43.75% of next $80 million and 70% thereafter to pay down debt.
Company has 3 major legal entanglements: (1) PT Media Citra Indostar is seeking refund of $163 million it paid in connection with satellite constructed by CTA Inc. under contract assigned to Orbital as part of 1997 acquisition of company. PT-MCI’s allegations include fraud and multiple breaches of contract. Orbital claims of $14 million against PT-MCI for unpaid invoices also are part of arbitration proceeding. (2) Thomas Van Heyden is seeking $30 million for “anticipatory breach of obligations.” (3) Infowest Services is seeking $80 million for breach of contract, abuse of govt. power and other related allegations in connection with BC Online procurement 1997-to-1999.