Subject: [NEXTEL-1] Satellite maker Loral Space & Communications files for Chapter 11

From: [email-masked]
Date: Tue, 15 Jul 2003 15:58:50 -0400

Satellite maker Loral Space & Communications files for Chapter 11

NEW YORK (AP)
July 15, 2003

Satellite maker Loral Space & Communications Ltd. (http://www.loral.com) filed for
Chapter 11 bankruptcy protection Tuesday, revealing more trouble in an industry
burdened with too much capacity. As part of the maneuver, Loral agreed to sell its
six North American satellites to Intelsat Ltd. for up to $1.1 billion.

New York-based Loral said it will reorganize around its remaining network of five
satellites and its satellite manufacturing operations. The company plans to use
most of what it collects in selling the other satellites to Intelsat to pay off
$959 million in secured bank debt.

That deal could close within four to six months, pending approval by regulators
and a bankruptcy court. Intelsat also agreed to order a new satellite from Loral,
and will make a $100 million down payment when the sale of the North American
satellites closes.

``Loral's principal challenge has been to overcome the effects of the prolonged
economic downturn that led to the lack of satellite manufacturing orders across
the industry and a slowdown in growth of fixed satellite services,'' said Bernard
L. Schwartz, Loral's chairman and chief executive.

Schwartz's statement said Loral has enough cash to continue normal operations and
customer support, and will not seek debtor-in-possession financing, in which a
company is funded through short-term loans that become first in line for
repayment.

Loral makes satellites for digital broadcasters such as EchoStar and DirecTV and
commercial weather forecasting, and leases capacity on its own network in space to
cable and TV broadcasters, communications providers and Internet companies.

But along with the overall communications market, the company's revenue has slid
in recent years while losses have mounted. Loral lost $1.47 billion in 2002 on
$1.10 billion in sales.

Loral is the descendant of a conglomerate founded in 1948 by William Lorenz (the
``Lor'') and Leon Alpert (the ``al''). After struggling with heavy losses and
facing a delisting on the New York Stock Exchange in 1972, Schwartz took over and
made the company profitable by focusing on military electronics.

After becoming a major defense contractor, Loral Corp. grew through several
acquisitions in the 1980s and 1990s. Then in 1996, Schwartz sold all of Loral's
holdings except its satellite business to Lockheed Martin for $9 billion, creating
Loral Space & Communications.

Even before the bankruptcy, Loral has seen its share of trouble.

Last year, the company paid a $14 million fine to settle a long investigation into
allegations it illegally transferred sensitive missile technology to the Chinese
government after a rocket carrying a Loral satellite exploded in 1996. The probe
itself became controversial during the Clinton administration because Schwartz was
a big donor to the Democratic Party.

Loral paid $5.5 million in 1989 after admitting the company paid a defense
consultant to obtain confidential information about a contract to make radar
detection equipment for F-16 fighters and another to build a Navy blimp.

Loral also was a partner in Globalstar Ltd., a satellite-based phone company that
burned through $4 billion before filing for bankruptcy last year. Wireless
communications pioneer Craig O. McCaw is buying control of Globalstar for just $55
million.

http://www.siliconvalley.com/mld/siliconvalley/6308799.htm

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