NEW YORK-Moody’s Investors Service Inc., New York, assigned a Caa long-term rating to two outstanding debt issues of Geotek Communications Inc., Montvale, N.J.
The speculative grade rating, with a stable outlook, was assigned to $75 million worth of outstanding senior subordinated convertible notes due 2001, and affirmed on $110 million in senior discount notes with warrants due 2005.
On the positive side, the Moody’s ratings announcement said it “recognizes the favorable long-term growth potential of cost-effective `one-to-many’ integrated voice and data wireless communications services.” Geotek’s product is cheaper and more practical than traditional service and more useful than dispatch radio, Moody’s assessment noted. Geotek’s service network, which is expected to be complete in two years, “has relatively strong capacity.”
Its infrastructure costs also are lower than those of Nextel Communications Inc., a potential competitor that is using digital enhanced specialized mobile radio technology. Other potential competitors are digital cellular service, personal communications services and advanced wireless messaging products.
“Geotek’s Caa debt ratings reflect risks surrounding its highly leveraged and thinly capitalized balance sheet…; the three-year horizon before meaningful cash flows are likely…; the need for up to $150 million in additional financing to complete the network infrastructure…[and] Geotek’s unproven-on a large scale-macrocellular frequency hopping technology,” Moody’s said.
