NOTE 8. Debt

2013 Credit Facility

In connection with the acquisition of GeoEye on January 31, 2013, the Company entered into a seven-year $550.0 million Senior Secured Term Loan Facility and a five-year $150.0 million Senior Secured Revolving Credit Facility (collectively, the “2013 Credit Facility”). The 2013 Credit Facility requires quarterly principal payments of $1.375 million starting June 30, 2013 with the remaining balance due February 1, 2020. Borrowings under the 2013 Credit Facility bear interest at an adjusted LIBOR rate, plus a 2.75% margin subject to a 1.0% LIBOR floor. The LIBOR margin becomes 2.5% when the ratio of total debt to Adjusted EBITDA is 2.5 or lower. The Company will also pay a commitment fee of between 37.5 to 50.0 basis points, payable quarterly, on the average daily unused amount of the revolving credit facility based on the Company’s leverage ratio. As of September 30, 2013, the Company had not drawn any amounts under the Senior Secured Revolving Credit Facility.

The Company’s obligations under the 2013 Credit Facility are guaranteed by certain of its existing and future direct and indirect wholly-owned domestic subsidiaries. The Company’s obligations and the obligations of the guarantor subsidiaries under the 2013 Credit Facility are collateralized by substantially all of the Company’s assets and the assets of the guarantor subsidiaries.

The 2013 Credit Agreement contains affirmative and negative covenants that the Company believes are usual and customary for a senior secured credit agreement. The negative covenants include, among other things, limitations on asset sales, mergers and acquisitions, indebtedness, liens, dividends, investments and transactions with its affiliates. The 2013 Credit Agreement also requires that the Company comply with a maximum leverage ratio and minimum interest coverage ratio. The Company was in compliance with its debt covenants as of September 30, 2013.

Senior Notes

Also in connection with the acquisition of GeoEye on January 31, 2013, the Company issued $600.0 million of Senior Notes (“Senior Notes”), which bear interest at 5.25% per year. Interest on the Senior Notes is payable on February 1 and August 1 of each year, beginning on August 1, 2013. The Senior Notes were issued at par and mature on February 1, 2021. The Company may redeem some or all of the Senior Notes at any time and from time to time on or after February 1, 2017, at the redemption prices set forth in the indenture governing the Senior Notes. The initial redemption price for the Senior Notes is 102.625% of their principal amount plus accrued and unpaid interest to the date of redemption. The Company may redeem some or all of the Senior Notes at any time prior to February 1, 2017, at a redemption price equal to 100% of their principal amount, plus a “make whole” premium, together with accrued and unpaid interest to the date of redemption. In addition, on or prior to February 1, 2016, the Company may redeem up to 35% of the principal amount of the Senior Notes using the net cash proceeds from sales of certain types of capital stock at a redemption price equal to 105.250% of the principal amount of the Senior Notes, plus accrued and unpaid interest to the date of redemption, subject to certain other provisions as set forth in the indenture governing the Senior Notes. If a change of control occurs, the Company must give holders of the Senior Notes an opportunity to sell the Company their Senior Notes at a purchase price of 101% of the principal amount of such Senior Notes, plus accrued and unpaid interest to the date of purchase.

The Senior Notes are senior unsecured obligations, ranking equally in right of payment with all of the Company’s existing and future unsecured and unsubordinated indebtedness and are senior to its existing and future subordinated indebtedness. The Senior Notes are unconditionally guaranteed, jointly and severally, by all of the Company’s existing and certain of its future direct and indirect wholly-owned domestic subsidiaries. Each guarantor’s guarantee ranks pari passu in right of payment with all future senior indebtedness of the guarantor.

The Senior Notes have not been registered under the Securities Act of 1933, as amended. The Company has agreed to file an exchange offer registration statement or, under certain circumstances, a shelf registration statement, pursuant to a registration rights agreement if the Senior Notes are not freely transferable on February 1, 2014 under Rule 144 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), by persons that are not “affiliates” (as defined under Rule 144) of the Company. The Company does not currently expect to be required to file an exchange offer or shelf registration statement with respect to the Senior Notes. If, however, circumstances change and the Company is required to file a registration statement but does not comply with its obligations, the Company will pay additional interest on the Senior Notes.

The Company paid $41.2 million of underwriting and other fees and expenses in connection with the 2013 Credit Facility and the Senior Notes, of which $5.0 million was included in “Loss on early extinguishment of debt” because a portion of the refinancing was accounted for as a “modification” and $36.2 million was capitalized as debt issuance costs and included in other assets.

The following table represents the Company’s future debt payments as of September 30, 2013:

(in millions)	Long-term debt (excluding interest payments)
2013 (1)	$	1.4
2014	5.5
2015	5.5
2016	5.5
2017	5.5
Thereafter	1,123.9
Total	$	1,147.3

(1) Represents long-term debt principal payments for the three month period ended December 31, 2013.

The net proceeds of the 2013 Credit Facility and Senior Notes were used, along with cash on hand, to refinance the Company’s 2011 $500.0 million senior secured term loan and $100.0 million senior secured revolving credit facility, to fund the discharge and redemption of GeoEye’s $400.0 million 9.625% Senior Secured Notes due 2015 and $125.0 million 8.625% Senior Secured Notes due 2016 assumed in connection with the acquisition of GeoEye, to pay the cash consideration under the merger agreement with GeoEye and to pay fees and expenses related to the foregoing transactions.

Retired 2011 Senior Secured Credit Facility

On October 12, 2011, the Company entered into a $500.0 million, seven-year senior secured term loan facility and a $100.0 million, five-year senior secured revolving credit facility (collectively, the “2011 Credit Facility”). As of January 31, 2013, the Company had a net unamortized debt discount of $12.5 million and deferred financing costs of approximately $7.8 million relating to the 2011 Credit Agreement. On January 31, 2013, in connection with the acquisition of GeoEye, the Company entered into the 2013 Credit Facility and issued the Senior Notes and repaid and retired the 2011 Credit Facility. DigitalGlobe’s entrance into the 2013 Credit Facility, issuance of the Senior Notes and payoff of DigitalGlobe’s pre-combination outstanding debt were assessed in accordance with ASC 470-50, Debt — Modifications and Extinguishments. As a result of the repayment and retirement of the 2011 Credit Facility, the Company performed an analysis of the holders of the Company’s debt before and after the transaction. The Company determined that 33% of the Company’s outstanding debt before the transaction was held by common debt holders after the transaction and that the terms of the new debt were not substantially different from the terms of the old debt. Accordingly, this portion of the debt was accounted for as a modification of debt and as a result, the Company allocated $7.5 million of the net unamortized debt discount and deferred financing costs to the 2013 Credit Facility and Senior Notes, which will be amortized as interest expense over the respective terms of the debt. The Company recorded a loss of $17.8 million during the three months ended March 31, 2013 primarily due to the write-off of the remaining $12.8 million of unamortized deferred financing fees and debt discount and approximately $5.0 million of fees paid in connection with the 2013 Credit Facility and Senior Notes.

Letters of Credit

At September 30, 2013 and December 31, 2012, DigitalGlobe had $1.2 million of restricted cash under the lease agreement for its headquarters in Longmont, Colorado. Additionally, at September 30, 2013, the Company had $1.1 million of restricted cash under the lease agreement for its office location in Herndon, Virginia. At September 30, 2013 and December 31, 2012, the Company had $21.0 million and $10.9 million, respectively, in letters of credit and performance guarantees used in the ordinary course of business to support advanced payments from customers under certain of the DAP contracts. These letters of credit are secured by restricted cash. The letters of credit and related restricted cash amounts are released when the respective contractual obligations have been fulfilled by the Company.

Interest Expense, net

The following table summarizes the Company’s interest expense, accretion of debt discount, amortization of the deferred financing fees and interest capitalized.

	For the three months ended September 30,						For the nine months ended September 30,
(in millions)	2013			2012			2013			2012
Interest	$	13.4		$	7.5		$	37.7		$	22.4
Accretion of debt discount, deferred financing amortization and line of credit fees	1.8			0.9			5.1			2.8
Capitalized interest	(14.4		)	(6.4		)	(39.0		)	(17.3		)
Interest expense	$	0.8		$	2.0		$	3.8		$	7.9
Interest income	(0.1		)	(0.1		)	(0.3		)	(0.2		)
Interest expense, net	$	0.7		$	1.9		$	3.5		$	7.7