Moody's Investors Service on Monday assigned a Baa1 rating with a negative outlook to $4.5 billion of Lockheed Martin Corp.'s bank debt.

The rating agency said its move was based on Lockheed Martin's own recent financial review, which presented "a substantially reduced earnings and cash flow outlook for 1999 and 2000."

Moody's said the primary reasons for the revised outlook are increased costs, reduced production rates, and delivery delays of C-130J military transport aircraft. Another reason cited is a string of recent failures of rockets used to launch satellites, leading to delays of launches and commercial satellite deliveries.

Moody's said it may further downgrade the ratings "if expected corrective actions do not lead to material long-term improvements in overall performance and Lockheed Martin's balance sheet."

The rating agency said it is "also concerned about the company's acquisition and investment strategy, which may require significant cash outlays while profits and cash flow are under downward pressure and persistent operating problems require management's undivided attention.

The rated bank facilities consist of a $1 billion, 364-day credit agreement that terminates on May 26, 2000, and a $3.5 billion revolving credit agreement that terminates Dec. 20, 2001.

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