Fitch Lowers Intelsat & Intelsat -Bermuda-; Initiates 'B-' Rating on Zeus

Business Wire, Feb 8, 2005

CHICAGO -- Fitch Ratings has downgraded and removed from Rating Watch Negative the ratings of Intelsat, Ltd. (Intelsat) and its wholly owned subsidiary, Intelsat (Bermuda), Ltd. (Intelsat Bermuda) following the issuance of $478.4 million ($305.2 million gross proceeds) of senior discount notes at an intermediate subsidiary currently named Zeus Special Sub Ltd. (Zeus). Intelsat's Rating Outlook is Stable. Fitch has also initiated a rating of 'B-' on the new Zeus senior discount notes. The rating actions are as follows:

Intelsat, Ltd.

-- Senior unsecured notes to 'CCC ' from 'B-'.

Zeus Special Sub Ltd.

-- Senior unsecured discount notes initiated at 'B-'.

Intelsat (Bermuda), Ltd.

-- Senior unsecured notes to 'B' from 'B ';

-- Senior secured credit facilities to 'BB-' from 'BB'.

The Stable Rating Outlook reflects the prospects for stable revenues from its lease backlog and the expected resulting free cash flow offset by a very competitive operating environment and ownership by an investment group.

Fitch's rating action affects about $4.9 billion of existing debt.

The new Zeus notes were issued by a newly formed intermediate subsidiary placed between Intelsat and Intelsat Bermuda. This ranks the new issue as structurally senior to the Intelsat senior notes and structurally junior to all of the debt at Intelsat Bermuda.

The issuance and subsequent use of proceeds to retire equity increases the estimated pro forma total leverage as of Sept. 30, 2004 from about 6.2 times (x) to 6.6x, based on Fitch estimates. When cash accrual on the notes begins in 2010, the annual cash interest payment will be approximately $44.3 million. Fitch's ratings not only reflect the overall increased leverage in the consolidated capital structure but also reflect Intelsat's possible need to increase capital spending at about the same time as the new Zeus senior discount notes go cash pay.

This action is based on existing public information and is being provided as a service to investors.