S&P puts Orbcomm on watch

S&P said it placed all its ratings for Orbcomm Inc., including its B- senior secured loan ratings, on CreditWatch with negative implications.

“The CreditWatch placement reflects weak operating and financial performance, and a deteriorating liquidity position due to increased working capital requirements because of supply chain constraints. Orbcomm's third-quarter revenue and EBITDA declined 4% and 27% year over year, respectively, primarily due to component shortages,” the agency said in a press release. To secure more inventory, Orbcomm has been making advance payments to a key manufacturer.

“This, combined with higher component and freight costs, other operating costs, and lower order fulfillment, has put pressure on its working capital. While we expect pre-paid inventory to benefit working capital in future periods as inventory is shipped, component and other operating costs could remain elevated if supply chain issues persist and shipping volumes remain subdued,” S&P said.

However, the agency said it sees Orbcomm raising short-term funding given its backlog and sponsor backing.

S&P warned it could lower Orbcomm’s ratings more than a notch. It expects to resolve the watch over the next few weeks.

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