TEXT-S&P affirms DigitalGlobe 'BB' ratings

Overview
-- We expect DigitalGlobe to continue to benefit from revenues from
its service-level agreement with a U.S. government agency, and from an increased
presence in commercial imagery processing and analytic services through its
proposed acquisition of GeoEye.
-- We are affirming our 'BB' corporate credit rating on DigitalGlobe and
removing these ratings from CreditWatch with negative implications.
-- Our ratings outlook is negative, which incorporates the expected
heightened leverage associated with the acquisition of GeoEye, and possible
integration risks, which could keep leverage high through 2014 if expected
cost savings from the merger are not fully realized.

Rating Action
On Aug. 10, 2012, Standard & Poor's Ratings Services affirmed its 'BB'
corporate credit rating and 'BB+' issue-level ratings on Longmont, Colo.-based
DigitalGlobe Inc. At the same time, we removed those ratings from CreditWatch,
where they were placed with negative implications on July 24, 2012. The rating
outlook is negative.

Rationale
The affirmation reflects our view that the business risk benefits of
DigitalGlobe's proposed acquisition of competitor GeoEye offset the effect of
higher leverage associated with the proposed combination. We believe
DigitalGlobe will continue to benefit from revenues from its EnhancedView
service-level agreement (SLA) with the National Geospatial-Intelligence Agency
(NGA), an arm of the U.S. government. Given the likelihood that the U.S.
government will substantially reduce or eliminate its EnhancedView SLA with
GeoEye, we believe it is less likely that the U.S. government will pursue
further budget cuts that would affect DigitalGlobe's EnhancedView SLA over the
next few years. As the potential sole provider of high-resolution commercial
satellite imagery services for various agencies within the U.S. government, we
believe DigitalGlobe is well positioned to retain its full share of expected
revenues from the EnhancedView SLA. At the same time, the ratings recognize
that government contracts are not guaranteed until Congress appropriates the
funds and that, although unlikely, government agencies may terminate or
suspend their contracts at any time. Pro forma for the GeoEye transaction,
about half of DigitalGlobe's revenue will come from customers within the U.S.
government, and we factor this customer concentration into our "fair" business
risk assessment.

In acquiring GeoEye, DigitalGlobe would gain a stronger foothold in image
processing and analytic services, which could help to drive ancillary revenue
growth in future years, particularly in the commercial and international
segments. DigitalGlobe currently has a relatively weak presence in the
advanced imagery processing and analytics segments, and the combination with
GeoEye provides the company with a full suite of imagery services that it can
provide to existing and potential customers. The acquisition of GeoEye is
subject to various regulatory approvals, but our base-case scenario envisions
the transaction being completed in early 2013.

The GeoEye acquisition provides DigitalGlobe with significant scale benefits
in the form of operational cost synergies and reduced capital spending to
manage a combined three-satellite constellation system. We recognize the
potential integration risks in realizing these synergies, which could keep
leverage high through 2014 if expected savings do not materialize, and we
incorporate this risk into our negative rating outlook.

DigitalGlobe's "aggressive" financial risk profile is based on our view that
total debt to EBITDA, including our adjustment for operating leases, will rise
above 4x in 2013 and funds from operations (FFO) to total debt will decline
below 20% in 2013, due to the acquisition of GeoEye. In 2014, our ratings
assume that credit metrics will improve to near pre-acquisition levels, with
debt to EBITDA in the low-3x area, and FFO to total debt in the mid-20% area.

Our base-case scenario also includes the following specific assumptions:
-- Revenue grows in the low-double-digit percentage area prior to
completion of the acquisition, primarily due to strong demand for services in
its commercial and international segments.
-- In 2013, the GeoEye acquisition closes, and the EnhancedView SLA with
GeoEye is not renewed. We expect organic revenue to grow in the
high-single-digit range for both 2013 and 2014.
-- EBITDA grows from around $160 million in 2012 to around $250 million
in 2013, mainly due to the acquisition, with EBITDA margins decreasing from
the mid-40% area to the high-30% range, to account for the loss of GeoEye
EnhancedView SLA revenues, and the high operating leverage inherent in the
satellite imagery business.
-- In 2014, we expect EBITDA of approximately $320 million due to the
expected realization of cost savings from the GeoEye acquisition, organic
revenue growth, and a further increase in recognizable revenue related to
DigitalGlobe's SLA.
-- Free operating cash flow (FOCF) remains negative in 2012 and 2013, as
a result of capital expenditures required for the completion of the
WorldView-3 and GeoEye-2 satellites. We expect the company to generate a
moderate level of FOCF in 2014 as a result of EBITDA growth and lower capital
spending requirements.

On Aug. 6, 2010, the NGA awarded DigitalGlobe a $3.55 billion award under its
10-year EnhancedView commercial imagery contract. Under the service-level
agreement (SLA) portion of this contact, the NGA is contractually committed to
make $250 million of imagery purchases per year for the first four years and
$300 million per year for the final six years. In exchange, DigitalGlobe must
make a substantial portion of its satellites' image-taking capacities
available to the NGA. The company expects commercial customers, other U.S.
government agencies, and non-U.S. governmental entities to take up the
remaining capacity.

DigitalGlobe's business plan greatly depends on its contract with the NGA, a
U.S. government entity which purchases earth imagery content from commercial
providers on behalf of other agencies within the U.S. government, including
the Departments of Defense (DoD), State, and Homeland Security; the Central
Intelligence Agency; and the Defense Intelligence Agency. Revenues from the
NGA SLA constituted approximately 48% of DigitalGlobe's consolidated revenues
in the second quarter of 2012.

DigitalGlobe currently operates three satellites: QuickBird, WorldView-1, and
WorldView-2. In addition, it is building a new satellite, WorldView-3, which
it expects would be ready for launch in 2014. DigitalGlobe is acquiring the
GeoEye-1 and GeoEye-2 satellites, with the latter expected to be ready for
launch in 2013. Historically, the on-orbit failure rate for the satellite
industry is about 5%, while rocket launches fail about 10% of the time.
Debtholders are provided some protection from satellite failure, as
DigitalGlobe currently maintains insurance on all its satellites.

Liquidity
We view DigitalGlobe's liquidity as "adequate" under our criteria. Sources of
liquidity are likely to be at least 1.5x uses over the next 12 months.
Further, we believe that DigitalGlobe could experience an unanticipated EBITDA
decline of at least 20% and maintain sources of liquidity adequate to cover
uses. At June 30, 2012, sources included a cash balance of over $210 mullion,
and expected FFO of about $150 million during 2012. Uses of liquidity
primarily consist of capital spending of about $200 million in 2012 for the
WorldView-3 satellite and maintenance of existing infrastructure. We expect
that the company's financial maintenance covenants under its revolving credit
will provide at least 15% of ongoing EBITDA cushion. Our liquidity assessment
incorporates the GeoEye acquisition at the beginning of 2013, when it plans to
refinance the debt of both companies.

Recovery analysis
For the recovery rating analysis, see Standard & Poor's recovery report on
DigitalGlobe, published on RatingsDirect on Sept. 26, 2011.

Outlook
The outlook is negative, which reflects the expected heightened leverage
associated with the acquisition of GeoEye, and possible integration risks,
which could keep leverage elevated through 2014 if expected synergies do not
materialize from the business combination. Given the significant customer
concentration from the U.S. government at around 50% of the combined
companies' revenues, it is unlikely that we would raise the rating unless
revenues become more diversified, and FFO to debt rose above 35% on a
sustained basis.

Conversely, we could lower the rating if FFO to debt were to remain under 20%
or if leverage were to remain above 4x on a sustained basis. As the
transaction moves toward closing, we will continue to monitor regulatory
approval hurdles for the GeoEye acquisition, but we do not expect these
approvals to pose a threat to the closing of the transaction.

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Ratings List

Ratings Affirmed And Off CreditWatch
To From
DigitalGlobe Inc.
Corporate Credit Rating BB/Negative/-- BB/Watch Neg/--

DigitalGlobe Inc.
Senior Secured BB+ BB+/Watch Neg
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.