L-3 Communications Holdings, Inc.

--IDR at 'BB+';

--Contingent convertible at 'BB+'.

L-3 Communications Corporation

--IDR at 'BB+';

--Revolving credit facility at 'BBB-';

--Term-loan facility at 'BBB-';

--Senior subordinated debt at 'BB+'.

Approximately $4.6 billion of debt outstanding is affected by the action.

The Rating Outlook is revised to Positive, which reflects L-3's strong credit metrics for the current rating and Fitch's expectation of continued solid organic sales growth, steady operating margins, and substantial free cash flow. Furthermore, the Outlook considers the company's improved leverage and potential for additional deleveraging depending on how the company handles debt maturities and cash deployment within the next several quarters. Small to medium-sized acquisitions and meaningful cash deployment toward shareholders are also incorporated into Fitch's expectations.

The affirmed ratings are supported by L-3's strong credit and operating profile as well as consistent cash flow generation, which support the company's debt servicing requirements. Other positive factors include high levels of defense spending; L-3's diverse portfolio of products and services that are in line with the Department of Defense (DoD) requirements; and a balanced contract mix, including generation of more than 50% of revenues from the Operations & Maintenance account in the DoD budget. Concerns relate to the potential for larger debt-financed acquisitions, a shareholder-focused cash deployment strategy, some uncertainty regarding core defense spending trends beyond fiscal year 2010, and the longer-term outlook for supplemental DoD budgets related to operations in Iraq and Afghanistan.

Fitch could consider an upgrade of L-3's ratings if the credit profile continues strengthening as a result of limiting cash deployment to amounts equal to or less than the amounts generated by the company's annual free cash flow. Significant improvements to the credit profile are possible if L-3 decides not to refinance maturing debt and instead elects to use cash to repay all or a significant portion of the $650 million term loan which is due in March 2010. Historically, the company has directed cash to acquisitions, share repurchases and dividends. In Fitch's view, acquisitions are the main risk to an improving credit profile, but Fitch notes that L-3's acquisition strategy appears to have moderated in the past several years.