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Announcement:

Moody's confirms GeoEye's B2 ratings; changes outlook to positive pending acquisition by DigitalGlobe

23 Jul 2012

New York, July 23, 2012 -- Moody's Investors Service has confirmed the ratings of GeoEye Inc. ("GeoEye") and changed the rating outlook to positive following the announcement that DigitalGlobe, Inc. will acquire the company for stock and assumption of debt. The rating action concludes the review for downgrade initiated on June 25, 2012. In addition, due to the receipt of the $111 million cost share payment earlier this month from the NGA, Moody's upgraded the company's liquidity rating to SGL-3 from SGL-4, indicating adequate liquidity as the company now has greater cash balances to continue the construction of its Geoeye-2 satellite.

Moody's views the transaction as credit-positive for both companies, as the combination stands to rationalize redundant satellite imagery capacity while minimizing the risk of future contract renewals by the National Geospatial-Intelligence Agency ("NGA"). The transaction is subject to requisite regulatory approvals, although, since Moody's believes that given the bipartisan support for the program in Congress and the reduction of future commitments to acquire imagery from both companies by NGA, regulatory approval will be likely.

Rating Actions:

.... Probability of Default Rating, Confirmed at B2

.... Corporate Family Rating, Confirmed at B2

....US$400M 9.625% Senior Secured Regular Bond/Debenture, Confirmed at B1

....US$125M 8.625% Senior Secured Regular Bond/Debenture, Confirmed at Caa1

.... Speculative Grade Liquidity Rating, Upgraded to SGL-3 from SGL-4

....Outlook, Changed To Positive From Rating Under Review

RATINGS RATIONALE

GeoEye's standalone pre-acquisition B2 CFR reflects the company's credit risk profile in light of possible material cutbacks to the contractual relationship between GeoEye and NGA. As GeoEye in aggregate, receives over 60% of its revenues from the US Government, replacing that revenue stream with other customers may stress the financial profile over the next two years, even after the receipt of $111 million cost share reimbursement from the NGA. On the other hand, Moody's believes that given the high probability of the proposed deal passing regulatory scrutiny without major concessions, the company's credit profile will be strengthened upon its acquisition by DigitalGlobe.

The NGA alerted GeoEye that it is unlikely to extend the SLA for the next contract year starting September 1, 2012 through August 31, 2013, but instead proposed a three month option which the NGA intends to exercise providing for service revenue to the company from September 1, 2012 through November 30, 2012 of $39.75 million, and a further nine month option for the remainder of the Contract Year through August 31, 2013 providing for service revenue to the Company, based upon the availability of funding, of $119.25. More importantly, The NGA is electing not to obligate additional funding under its cost share agreement with the company for the development and launch of GeoEye- 2, scheduled for launch in the first half of 2013. NGA is proposing new milestones for payment of the remaining $70 million cost-share which would occur before the launch of GeoEye-2. Therefore, should the pending transaction with DigitalGlobe not go forward, the company's credit profile would be stressed over the next two years.

What Could Change the Rating - Up

Upward rating momentum will be limited given the pending acquisition by DigitalGlobe. On a standalone basis, ratings may be upgraded given a successful launch and deployment of the GeoEye-2 satellite, the company diversifies its revenue stream away from the US government, and the resulting cash flow augments the company's liquidity.

What Could Change the Rating - Down

The rating and/or outlook may be revised down if the DigitalGlobe transaction does not close and unfavorable DoD budget outcomes significantly curtail US government revenues, and if the company is unable to replenish those revenues from other customers. Given the high technology risk endemic in the company's business model, ratings would also come under pressure if there is a significant impairment of assets in space that is not covered by insurance.

The principal methodology used in rating GeoEye Inc was the Global Aerospace and Defense Industry Methodology published in June 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Headquartered in Dulles, VA, GeoEye, Inc. (GeoEye) is a commercial satellite company (formed as a result of ORBIMAGE's January, 2006 acquisition of Space Imaging) operating two earth imaging satellites - GeoEye-1 and IKONOS. The company also owns and operates a network of ground stations and provides aerial imagery services. The company has an extensive archive of satellite imagery, and has advanced geospatial imagery processing capabilities. GeoEye is one of two US based companies (along with DigitalGlobe Inc) operating in this industry, and the larger of the two by revenues.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Gerald Granovsky
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

John Diaz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's confirms GeoEye's B2 ratings; changes outlook to positive pending acquisition by DigitalGlobe
No Related Data.
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