S&P rates Kratos Defense notes B+

Standard & Poor's said it assigned a B+ corporate credit rating to Kratos Defense & Security Solutions Inc., along with a B+ rating and recovery rating of 3 to its proposed $200 million secured notes, indicating an expectation of 50% to 70% recovery in a default. The company will offer the notes via Rule 144A with registration rights.

The outlook is stable.

The company plans to issue $200 million of secured notes to fund the acquisition of Gichner Holdings Inc. ($133 million), refinance existing bank debt ($53.5 million) and pay related fees and expenses, S&P said.

The company expects the acquisition to close by June 2010, the agency added.

Credit protection measures following the transaction should be average for the ratings, with some modest improvement likely as earnings increase, S&P said.

Demand for Kratos' products and services should remain good for the next few years, despite slowing defense budget growth, the agency added.

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