TEXT-S&P cuts GeoEye to 'B-' from 'B+'

Overview
-- U.S. satellite imagery provider GeoEye received notice that a U.S.
government agency has elected not to exercise its full-year option for the
EnhancedView service-level agreement (SLA) due to potential funding shortfalls.
-- The National Geospatial-Intelligence Agency (NGA) is proposing a
three-month option for the SLA with an additional nine-month option, pending
availability of funding. We believe there is heightened risk of a significant
reduction of revenues from the NGA in future periods.
-- We are lowering the corporate credit rating on the company to 'B-'
from 'B+' and lowering all issue-level ratings by two notches.
-- The outlook is developing, indicating that we could lower the ratings
further if GeoEye loses a substantial portion of future SLA revenues, or raise
them if the risk of government cutbacks recedes.

Rating Action
On June 26, 2012, Standard & Poor's Ratings Services lowered its ratings on
GeoEye Inc., including the corporate credit rating to 'B-' from 'B+'.
The outlook is developing.

We also lowered all issue-level ratings by two notches. In addition, we
withdrew the rating on subsidiary ORBIMAGE Inc., as there is no debt
associated with this entity.

Rationale
The rating actions reflect what we consider heightened risk of a substantial
reduction of U.S. government revenues beginning in late 2012 or in late 2013,
which, in our view, would severely reduce the company's profitability and cash
flow generation. Accordingly, we have revised our business risk assessment to
"vulnerable" and our financial risk assessment to "highly leveraged."

GeoEye said it received notice from the National Geospatial-Intelligence
Agency (NGA) that the government agency would not fully renew the EnhancedView
service-level agreement (SLA) for the contract year Sept. 1, 2012 through Aug.
31, 2013. Instead, the NGA proposed a new three-month option, which it intends
to exercise, providing service revenue to GeoEye from Sept. 1, 2012 through
Nov. 30, 2012 of $39.75 million. The NGA also proposed an additional
nine-month option for the remainder of the contract year through Aug. 31,
2013, providing $119.25 million of revenue. However, the agency said the
second option is based on the availability of U.S. government funding.

In addition, the NGA told GeoEye that it is proposing to change a cost-sharing
agreement for the development of GeoEye-2, a new satellite scheduled to launch
in the first half of 2013. Of the $181 million that the NGA previously agreed
to fund, GeoEye expects that it will receive $111 million within the next 30
days. The remaining $70 million in funding depends on certain milestones being
met, with no guarantees that funding beyond the $181 million will be provided.

While the temporary SLA renewals would represent a modest increase in revenues
from the NGA for GeoEye, we believe the developments indicate heightened risk
of a substantial loss of revenue, amid an already uncertain environment for
government spending. The EnhancedView SLA program accounted for $147 million
of GeoEye's revenues during 2011 (approximately 41% of total revenue), and
U.S. government revenues in total represented $228 million (64% of total
revenue). Therefore, we believe the loss of most of this business would cause
GeoEye's credit metrics to deteriorate substantially. As of March 31, 2012,
the company's adjusted leverage was at 3.4x, but this measure will rise
substantially if the NGA does not renew the SLA due to potential funding
shortfalls. The high operating leverage inherent in the satellite imagery
business implies that nearly all lost revenue from a loss of the EnhancedView
contract would detract from EBITDA, unless GeoEye can win additional business
from non-U.S. government or commercial customers to use available capacity on
its satellites.

Liquidity
We consider liquidity "adequate" based on current sources and uses, but this
assessment could change in the next year depending on the outlook for future
renewals of the EnhancedView SLA. Sources of liquidity include $181 million in
unrestricted cash and short-term investments as of March 31, 2012, and funds
from operations we assume to be around $110 million per year (which includes
adjustments for capitalized interest), based on the current level of revenues
from the U.S. government. We expect capital expenditures of approximately $260
million in 2012 to be partially offset by the $111 million of cost sharing
from the NGA which GeoEye expects to receive by the end of July 2012.

Outlook
The developing outlook indicates there is a one-third or greater possibility
of a downgrade and a one-third or greater possibility of an upgrade over the
next year, pending further clarity around the NGA's funding decisions for
GeoEye's services. We could lower the rating if the NGA decided not to
exercise the additional nine-month option for the next contract year and all
SLA revenues ceased in December 2012. We could also lower the rating if the
likelihood of GeoEye losing all or most of its government business became more
likely.

Conversely, we could raise the rating if the company were to receive greater
clarity about future funding for the SLA program and once GeoEye-2 became
fully operational. However, we believe an upgrade would be limited to one
notch given the likelihood of ongoing funding risks. The ability to diversify
with other customers would be a positive factor, but given long lead times for
new business wins, this is likely to be a positive rating factor on its own in
the next year.

Related Criteria And Research
-- A Matter of Policy: U.S. Telecom Companies Maintain High Dividend
Payouts, But For How Long?, May 30, 2012
-- A Matter of Policy: U.S. Cable And Satellite-TV Companies Ratchet Up
Shareholder Payouts, May 16, 2012
-- Top 10 Investor Questions: U.S. Telecom and Cable Industries, May 10,
2012
-- Assessing The Four-Notch Rating Gap Between The Two U.S.
Direct-To-Home Satellite Video Operators, May 9, 2012
-- Issuer Ranking: U.S. Telecommunications And Cable Companies, Strongest
To Weakest, April 26, 2012
-- Industry Report Card: U.S. Telecommunications And Cable: Some Islands
Of Weakness In A Relatively Stable Sea, April 25, 2012
-- U.S. Cable Sector Overview: Growth Slows As The Industry Matures,
March 21, 2012
-- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011

Ratings List

Downgraded; CreditWatch/Outlook Action
To From
GeoEye Inc.
Corporate Credit Rating B-/Developing/-- B+/Negative/--

Downgraded; Recovery Ratings Unchanged
To From
GeoEye Inc.
Senior Secured 2nd-lien CCC B-
Recovery Rating 6 6
Senior Secured 9.625% nts B BB-
Recovery Rating 2 2

Ratings Withdrawn

ORBIMAGE Inc.
Corporate Credit Rating NR B+/Negative/--

Complete ratings information is available to subscribers of RatingsDirect on
the Global Credit Portal at www.globalcreditportal.com. All ratings affected
by this rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left
column.