Fitch Rates DRS Convertible Senior Notes 'BB'; Affirms All Other Ratings.

NEW YORK -- Fitch Ratings has rated the following debt issuance of DRS Technologies, Inc. (DRS):

-- Proposed convertible senior unsecured notes due 2026 'BB/Recovery Rating (RR) RR2';

The following ratings for DRS have been affirmed:

-- Issuer default rating (IDR) 'B+';

-- Proposed senior secured credit facility 'BB+/RR1';

-- Proposed senior notes 'BB/RR2';

-- Proposed and existing senior subordinated notes 'B-/RR6'.

The Rating Outlook remains Stable.

These actions assume that the Engineered Support Systems, Inc. (EASI) acquisition and associated debt issuances close under the announced terms. Approximately $2 billion of existing and proposed debt is covered by these actions.

The ratings reflect continued high levels of defense spending, good pro forma free cash flow generation, DRS' proven ability to increase margins at acquired companies, expected growth in homeland security spending, and healthy pro forma EBITDA margins. The ratings also consider DRS' diversification within the defense and homeland security arena, and the alignment between DRS' products and services and expected Department of Defense (DoD) and Homeland Security needs, all of which will be aided by the EASI acquisition. Fitch's concerns center on DRS' ability to integrate EASI, the company's future acquisition plans, limited financial flexibility due to high debt levels, potential changes within the DoD budget, the price being paid for EASI, and Securities and Exchange Commission (SEC) investigations of EASI.

Fitch's ratings and Stable Outlook incorporate expectations for deployment of free cash flow toward debt reduction in the next 12 months. In addition, the Outlook is based on the favorable effect of DoD supplemental budgets offset by near-term concerns about uncertainty in the DoD budget related to overall spending pressures due to the federal budget deficit, the Quadrennial Defense Review (QDR), and 'transformation.'

The Recovery Ratings and notching in the debt structure reflect Fitch's recovery expectations under a scenario in which distressed enterprise value is allocated to the various debt classes. The recovery ratings for the senior secured credit facility ('RR1', reflecting expected 100% recovery), the senior unsecured notes and the convertible senior unsecured notes (both 'RR2', reflecting expected recovery of 70%-90%) benefit from substantial cushions of subordinated debt and equity as well as covenants that preclude the issuance of significant amounts of debt without sizable increases in EBITDA. The senior subordinated debt ratings ('RR6') reflect the expectation of poor recovery prospects in a distressed case.

Please see Fitch's press release dated Jan. 20, 2006, entitled 'Fitch Ratings Initiates 'B+' IDR for DRS; Outlook Stable,' available at www.fitchratings.com, for more details.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. The ratings above have been initiated by Fitch as a service to investors.