Lockheed Martin Shares Dive 7.5% After Downgrades
Lockheed Martin Corp. shares fell 7.5% after two credit-rating agencies downgraded the defense company's debt. The downgrades signal that interest rates will increase on about $3 billion in commercial paper, according to credit experts.</br></br>The downgrades by Moody's Investors Service Inc. and Standard & Poor's Ratings Services sent Lockheed Martin shares down $1.50 to close at $18.5625 in New York Stock Exchange 4 p.m. trading. The stock has dropped from a 52-week high of about $56.75, as a series of management and program problems have emerged in the past year.</br></br>Some of the new ratings are at the lowest possible level in the "investment-grade" category. The drops stem from a Lockheed Martin forecast last week indicating that year-2000 cash flow will drop to less than $500 million from about $900 million estimated in late September. Lockheed Martin, based in Bethesda, Md., also said its year-2000 earnings are likely to be about $1 a share, instead of the $2.15 a share forecast in late September.</br></br>Lockheed Martin has faced serious production and sales problems in certain of its units making satellites, rockets and some military aircraft.</br></br>Wall Street experts said the most dramatic effect of the credit-agency downgrades would be the increased interest rates applied to the $3 billion or so of commercial paper the company has used for short-term borrowing. The paper typically features a variable interest rate. Another effect could be to trigger further sales of the stock by institutional holders. Analysts speculated some of that selling already has begun.