Moody's cuts DRS, rates loan Ba3

Moody's Investors Service said it lowered DRS Technologies Inc.'s corporate family rating to B1 from Ba3 and the company's 6 7/8% senior subordinated notes to B3 from B2.

Moody's also assigned a Ba3 rating to the company's proposed $650 million senior credit facilities, which include a $350 million revolving credit facility due 2011 and a $300 million term loan due 2012.

The outlook is stable.

Proceeds from the new credit facility will be used to partially fund the acquisition of Engineered Support Systems Inc. for about $1.9 billion, to repay about $88 million of Engineered Support's debt, to refinance existing DRS senior secured debt and for transaction fees.

The downgrade reflects DRS' high leverage, integration risks associated with the acquisition and the potential for additional leverage associated with future acquisitions, the agency said.

Moody's said these effects are offset somewhat by the company's history of integrating prior acquisitions while promptly repaying debt and restoring credit fundamentals, the company's strong operating performance, substantial liquidity levels and an ongoing strong defense and civilian security business environment.

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