TEXT-S&P puts DigitalGlobe 'BB' rating on watch negative

Tue Jul 24, 2012 3:00pm EDT

Overview
     -- U.S. satellite imagery provider DigitalGlobe plans to acquire 
competitor GeoEye Inc. in a stock and cash transaction valued at
approximately 
$900 million.
     -- We are placing our rating on DigitalGlobe on CreditWatch with negative 
implications, given the heightened leverage associated with the transaction.
     -- Within the next six to eight weeks, we plan to assess the overall 
business risk profile of the combined company and time frame for it to achieve 
improvement in credit metrics.  
     -- On completion of the transaction, we would withdraw all the ratings on 
GeoEye, since DigitalGlobe expects to repay all debt held at GeoEye.

Rating Action
On July 24, 2012, Standard & Poor's Rating Services placed its ratings on 
Longmont, Colo.-based DigitalGlobe Inc., including the 'BB' corporate credit 
rating, on CreditWatch with negative implications. 

Rationale
The CreditWatch listing reflects the potential for higher leverage following 
the acquisition of GeoEye Inc., which the companies expect to complete by the 
first quarter of 2013, subject to regulatory and shareholder approvals. 
DigitalGlobe plans to refinance GeoEye's debt in the weeks leading up to the 
acquisition closing. It will also likely issue preferred shares to Cerberus, 
which would receive 50% debt treatment under our adjustments. Our base-case 
scenario also incorporates the elimination of revenues from GeoEye's National 
Geospatial-Intelligence Agency (NGA) service-level agreement (SLA). 

However, we expect DigitalGlobe to continue to benefit from revenues from its 
own SLA with the NGA, and from the increased presence in the commercial 
imagery processing and analytic services markets provided by GeoEye. We also 
believe management's targeted cost synergies are largely attainable, although 
we still expect leverage and funds from operations to debt to be elevated for 
the 'BB' rating in 2013, at above 4x and below 20%, respectively. We could 
therefore revise our financial risk profile to "aggressive" from 
"significant," especially if we determine that improvement prospects could be 
delayed or impaired by a potential drop in business from U.S. government 
agencies, which are likely to comprise about 50% of total 2013 pro forma 
revenues. 

CreditWatch
Within the next six to eight weeks, we plan to assess the overall business 
risk profile of the combined company and the time frame for it to achieve 
improvement in credit metrics. At that time, we will either affirm the ratings 
and remove them from CreditWatch, or leave them on CreditWatch, and indicate 
that we will lower them at completion of the transaction, which is subject to 
numerous regulatory approvals.

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Ratings List

Ratings Placed On CreditWatch
                                        To                 From
DigitalGlobe Inc.
 Corporate Credit Rating                BB/Watch Neg/--    BB/Negative/--
 Senior Secured                         BB+/Watch Neg      BB+
   Recovery Rating                      2                  2


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.
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