Will Reorganize Around Five-Satellite Network And Satellite Manufacturing Operations

Sale Proceeds To Be Used To Significantly Reduce Debt

Space Systems/Loral To Receive Order For New Satellite From Intelsat

NEW YORK – July 15, 2003 – Loral Space & Communications Ltd. (NYSE: LOR) today announced that it has reached a definitive agreement to sell its six North American telecommunications satellites to Intelsat, Ltd. for up to $1.1 billion in cash, subject to certain price adjustments related to Loral’s ability to achieve specified operating parameters prior to the close. In conjunction with and as a precondition to this sale, Loral and certain of its subsidiaries today filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

Loral intends to reorganize around its remaining fleet of five satellites and its satellite manufacturing operations, allowing the company to go forward as a viable enterprise with opportunities for future growth. The Chapter 11 filing, made today in the U.S. Bankruptcy Court for the Southern District of New York, will enable Loral to sell the six North American satellites free and clear of any encumbrances.

It was also announced today that Intelsat has agreed to order a new satellite from Loral and will make a $100 million down payment on that order upon closing of the sale of the North American satellites.

Loral expects to use most of the proceeds from the sale of the North American satellites to repay all $959 million of its outstanding secured bank debt. The transaction is expected to close within four to six months, pending Bankruptcy Court and regulatory approval. The agreement provides for the sale of Telstars 4, 5, 6 and 7, which are currently in orbit, as well as Telstars 13 and 8, which are scheduled to be launched later this year and in the first half of next year, respectively.

Through its Skynet subsidiary, Loral will continue to operate an integrated fixed satellite and network services business using its fleet of five telecommunications satellites and its established VSAT/fiber global network infrastructure. The Loral fleet will consist of the Telstar 10, 11 and 12 satellites currently in orbit and Telstar 18/Apstar V and Telstar 14/Estrela do Sul, which are scheduled to be launched within the next nine months. This fleet serves markets in South America, Europe and Asia that the company believes are currently underserved and have potential for growth.

Loral will also continue to own and operate Space Systems/Loral (SS/L), a world-class leader in the design and manufacture of satellites and satellite systems for commercial and government applications and one of only five such manufacturers in the world.

Bernard L. Schwartz, chairman and chief executive officer of Loral, said: “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 (FSS). We have concluded that a sale of the North American satellites, coupled with a Chapter 11 reorganization, represents the best way to resolve the financial difficulties that have resulted from the downturn. We will be able to use the substantial cash proceeds generated by this transaction to reduce our secured debt, while allowing Loral to reorganize around its remaining satellite fleet and satellite manufacturing business.”

Loral believes that it currently has adequate cash on hand and cash flow from operations to continue normal operations and customer support. Accordingly, the company has decided not to obtain third-party debtor-in-possession (DIP) financing at this time. Loral will continue to evaluate its liquidity needs on an ongoing basis.

On June 30, Loral announced that it had collected $55 million in cash from Intelsat, resulting from an acceleration of a receivable for agreed-upon orbital performance payments. Separately, the company also announced on June 30 that it had reached a settlement with Alcatel resolving all outstanding issues between them including a contract dispute that had been in arbitration.

Today’s actions follow a confluence of events that have severely affected Loral’s financial performance in recent years. These include overcapacity in the existing global satellite universe, which created a severe drought in orders for new satellites; the collapse of the capital markets, which hampered the ability of many of Loral’s customers to raise capital for planned projects and also hindered the company’s own plans to raise capital; and a significant reduction in FSS demand from telecommunications providers, particularly from Internet-related companies.

Loral currently has approximately $2.1 billion in long-term debt (including the $959 million of bank debt), resulting mainly from its investments in Globalstar as well as the rapid build-up of its FSS fleet, which has demonstrated its value over time through its strong cash flow and EBITDA performance.

Mr. Schwartz said: “Our investment in the North American fleet yielded an attractive return. At the same time, we are encouraged about the prospects for the FSS fleet that will remain after the sale is completed. In particular, we believe our markets in South America and Asia are under-served and have growth potential.

“We also believe that Space Systems/Loral is an attractive asset at a time when the satellite manufacturing industry worldwide is poised for consolidation and is experiencing early indications of an upturn in new orders. Our objective for SS/L is to allow it to move forward as an integrated, ongoing concern with the financial resources it needs to grow.”

In addition to the satellite order from Intelsat, SS/L recently was awarded a $113 million contract to provide batteries and power systems for the International Space Station. Earlier this year, WildBlue Communications Corp., Denver, Colo. ordered a restart from SS/L of its WildBlue-1 satellite program.

The company believes that its plan to substantially reduce long-term debt and interest expense going forward should help address concerns customers and suppliers may have had about its financial condition. Moreover, one of the benefits of the Chapter 11 process is that the company’s obligations to customers and suppliers made after the filing are treated more favorably under the Bankruptcy Code than similar obligations made before the filing.

In conjunction with the Chapter 11 filing, Loral will file shortly a motion with the court seeking approval of procedures for the sale of the six North American satellites. In accordance with these procedures, the proposed transaction with Intelsat will be subject to higher and better offers. The company has also filed other customary “First Day Motions” to support its employees, customers and suppliers. The company expects that employees will continue to receive their customary salaries and benefits. Suppliers will be paid under normal terms for goods and services provided on or after the petition filing date of July 15, 2003. Loral today also began a similar legal proceeding in Bermuda, where it is incorporated.

“We regret deeply the impact that a Chapter 11 filing will have on many of our stakeholders – particularly our shareholders, who have been so patient and loyal during these turbulent times,” Mr. Schwartz said. “Loral’s senior management has worked ceaselessly to try to avoid such a filing, but we have reluctantly concluded that the asset sale and debt reduction could only be achieved through the Chapter 11 reorganization process. We intend to move through this process as quickly as possible.”

Loral Space & Communications is a satellite communications company. It owns and operates a global fleet of telecommunications satellites used by television and cable networks to broadcast video entertainment programming, and by communication service providers, resellers, corporate and government customers for broadband data transmission, Internet services and other value-added communications services. Loral also is a world-class leader in the design and manufacture of satellites and satellite systems for commercial and government applications including direct-to-home television, broadband communications, wireless telephony, weather monitoring and air traffic management.

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This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, Loral Space & Communications Ltd. or its representatives have made or may make forward-looking statements, orally or in writing, which may be included in, but are not limited to, various filings made by the company with the Securities and Exchange Commission, press releases or oral statements made with the approval of an authorized executive officer of the company. Actual results could differ materially from those projected or suggested in any forward-looking statements as a result of a wide variety of factors and conditions, which have been described in the section of the company’s annual report on Form 10-K for the fiscal year ended December 31, 2002, entitled “Certain Factors That May Affect Future Results,” and the company’s other filings with the Securities and Exchange Commission. The reader is specifically referred to these documents.

Contacts:

Jeanette Clonan or John McCarthy
Loral Space & Communications
212/697-1105