S&P rates MacDonald, Dettwiler facilities BB

S&P said it assigned a BB corporate credit rating to MacDonald, Dettwiler and Associates Ltd. (MDA).

The outlook is stable.

At the same time, the agency assigned BB issue-level and 3 recovery ratings to the company's first-lien credit facilities, which include a $1.15 billion revolver due in 2021, $100 million operating facility due in 2021, $250 million term loan A1 due in 2020, $250 million term loan A2 due in 2021 and $2 billion term loan B due in 2024. The 3 recovery rating indicates an expectation for meaningful recovery (50%-70%; rounded estimate: 50%) in a default scenario.

MDA plans to acquire DigitalGlobe Inc. for C$4.4 billion, including DigitalGlobe’s debt, using a combination of new bank debt and MDA stock to finance the transaction.

S&P said the rating reflects the company's increased debt but modestly improved scale and product diversity, as well as increased exposure to revenues from the U.S. government that will result from the acquisition.

The rating also reflects the combined company's leading positions in niche communications-satellites and satellite-imagery markets, above-average margins, limited cash flow in the next few years due to high capex requirements at DigitalGlobe, somewhat high program concentration, participation in the cyclical and currently weak communications-satellite market, and integration risks, the agency explained.

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