ORBIMAGE SKIPS DEBT PAYMENT AND REORGANIZES FINANCES
Orbimage will miss debt payment scheduled for March 1 in effort to keep company operating until it can get first high- resolution imaging satellite launched and generating revenue, company said. Pres. Gil Rye said company remained “bullish and optimistic” about business prospects: “We have a market waiting for a satellite.” Cash flow and satellite delays have forced company to restructure its financing, but it hopes to have new financing package in place within 60 days, official said. He said “slips” in Orbital schedule for “constructing and delivering” OrbView 4 satellite had caused “temporary cash shortfall.” Rye said Orbimage had had to “juggle some financial obligations to minimize the impact” of problems. One satellite analyst estimated company needed $20 million to keep operating until satellites were launched. Orbimage announced Feb. 15 it would miss payment.
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Company has $225 million in senior notes at 11-5/8% interest that mature in 2005. Discussions are being held with parent Orbital and others to obtain additional funding, it said, but Orbital spokesman said company “isn’t planning to provide any additional financing” at this time. Orbital has announced similar policy for another struggling subsidiary, Orbcomm (CD Feb 7 p3). “These are appropriate steps at this time in company history,” Orbital spokesman said. Orbcomm is “doing their best to manage the company properly. We're not too far away.” Orbimage hired Rothschild investment firm to reorganize finances.
Orbimage is trying launch 2 satellites with ability to take pictures with 1 m resolution. OrbView 4 satellite still is scheduled to fly “later this year,” spokesman said, while OrbView 3 should be ready in 2002. Both satellites were manufactured by Orbital Sciences and were scheduled for launch in 2000 before OrbView 3 experienced design problems with cameras and gyroscopes, industry source said. OrbView 4 has been delayed because subcontractors have had trouble testing system. Source said Orbital also contributed to problem by failing to meet deadlines, but Orbital Sciences spokesman said company “doesn’t agree” with assertion.
Meanwhile, Orbimage modified license agreement with MacDonald Detwiler & Assoc. (MDA) that gave company exclusive worldwide distribution rights for imagery from RadarSat 2 satellite scheduled for flight in 2003. Under new agreement, Orbimage will retain exclusive distribution rights for RadarSat 2 imagery in U.S. while releasing rights in other parts of world. New agreement will reduce financial obligation of Orbimage to RadarSat to $40 million from $60 million, including $30 million already paid and another $10 million outstanding, MDA CEO Martin Friedman said in Feb. 15 conference call with investors. Orbimage also is responsible for 60% of operating costs, estimated at $6 million per year. Restructuring will save it from making $15 million payment due this year, spokesman said. Caveat is that Orbimage will lose U.S. distribution rights if it fails to make any payment.