Hughes Downgrade Reflects Market Jitters


Moody's Investors Service Inc. said last week that it
has put Hughes Electronics Corp.'s senior long-term commercial-paper ratings on
review for possible downgrade, reflecting Wall Street's sudden concerns over
direct-broadcast satellite stocks.

Shares of the leading DBS companies -- General Motors Corp.
subsidiary Hughes owns DirecTV Inc., while EchoStar Communications Corp. owns Dish Network
-- dipped last week after riding a near-tidal wave of optimism

EchoStar's share price -- which rose by nearly $20 in
the past month, to $97 -- fell about $10 from last Monday to Tuesday, closing at $87.50.
Hughes' stock dropped about 75 cents per share in that time frame.

Although EchoStar spiked by $6 per share earlier in the
week, from $91 to $97, the dip in the company's stock may have been spurred by a
downgrade by C.E. Unterberg, Towbin analyst William Kidd, who cut his rating from
"buy" to "hold."

Kidd wrote in a report on EchoStar that the stock may be
overvalued: "Although EchoStar's future is bright, the share price has run ahead
of the business. Pending 'catalysts' may be a prime opportunity to sell into
possible price strength -- an important factor to consider, given EchoStar's
often-tight liquidity."

EchoStar stock may have also been hurt by delays in
launching its next satellite, EchoStar V, which has been held back due to bad weather

Lockheed Martin Corp., which is launching the satellite,
has held back the launch on two occasions -- at press time, it was scheduled to launch
last Thursday -- because its Cape Canaveral, Fla., launch site was in the path of
Hurricane Floyd.

Although hurricanes haven't been a problem for
DirecTV, its stock may also be adversely affected by an unfavorable analyst report.

Last week, Moody's put Hughes' senior long-term
commercial paper on review, in part due to expectations of cash-flow shortfalls and higher
leverage at DirecTV relative to prior expectations.

Moody's expected debt to increase due to a number of
initiatives being undertaken by the company. But cash-flow shortfalls will likely push
capital requirements higher over the near term.

Although DirecTV is beating Moody's subscriber-growth
expectations, the rating service said that growth would crimp cash-flow growth, while
improving the company's longer-term prospects.

Aside from DirecTV, Hughes also has exposure to ICO Global
Communications Holdings Ltd., a London-based satellite-telephone company that recently
filed for bankruptcy protection.

Hughes owns a 4 percent stake in ICO, and it is the
company's largest contractor. Hughes said previously that it would potentially face
exposure of about $500 million, before taxes, if ICO was liquidated.

In addition, since Hughes is in an intensive
capital-spending period, Moody's review will also focus on the company's capital
requirements for projects like its own "Spaceway" broadband-data initiative and
its many international ventures, as well as on the health of the company's four main
business segments.

Although GM owns Hughes, its credit ratings assume no
support from GM.