Court Approves Loral’s Exit from Bankruptcy
PARIS — Loral Space and Communications Ltd. has won its bankruptcy court’s approval for a reorganization that leaves Loral’s equity shareholders with nothing, but permits Loral’s new owners to start afresh with a satellite plant brimming with new orders and a satellite-services business ready to expand into new markets, Loral Chairman Bernard L. Schwartz said July 29.
The bankruptcy court for the Southern District of New York approved Loral’s proposed reorganization plan July 25, permitting New York-based Loral to exit Chapter 11 bankruptcy protection, which it entered in July 2003.
With the new ownership, New York-based Loral is obliged to ask U.S. Federal Communications Commission approval to transfer title to Loral’s satellite-broadcast and orbital-slot licenses, a process that Schwartz said could take 60 to 90 days. The company is fully capitalized and will seek a listing on the U.S. Nasdaq stock exchange, Schwartz said.
MHR Fund Management LLC of New York, headed by Mark H. Rachesky, will be Loral’s biggest single shareholder under the new organization, with a stake of more than 20 percent, Schwartz said.
The bankruptcy court’s detailed conclusions about Loral — specifically its market value and the stock options awarded to the company’s existing management — were not available as of July 29. But Loral and other industry officials involved with the case said the judge broadly accepted Loral’s argument that the equity shareholders would not be “in the money” under any reasonable assessment of the company’s value.
Schwartz and one industry official said the court evaluated Loral’s enterprise value — including its Palo Alto, Calif., real estate, its orbital slots, its cash and its satellite-manufacturing and satellite-services business — at about $950 million.
Pinning a value on Loral — an expert was hired to study the issue — proved no easy task, especially since the value ofof Palo Alto, Loral’s satellite builder, has risen sharply in the two years since the bankruptcy filing.
Loral has won nine commercial telecommunications satellite orders in the past two years, whereas before bankruptcy it had suffered a two-year period devoid of contract wins. Of these nine satellites, six are from established satellite-fleet operators — PanAmSat Corp., EchoStar Communications Corp., DirecTV Group, XM Satellite Radio andLtd.
During the same two-year period, Space Systems/Loral shed some 15 percent of its staff and now counts 1,400 employees. Schwartz said recent contract awards have reversed the trend, and that Space Systems/Loral is hiring staff to keep up with the new work.
Loral’s satellite-services fleet, currently concentrated over Asia and South America, is looking to expand into the Middle East and Africa, Schwartz said, and is likely to order a replacement for its Telstar 11R satellite. The Loral Skynet satellite-services business, based in Bedminster, N.J., has about 360 employees, Schwartz said.
“We don’t think we want to expand in North America or in Europe, which are well-served, but there are places like Africa and the Middle East that are under-served,” Schwartz said. “We also will be adding capacity [over Asia] following our agreement with Apstar.” APT Satellite Holdings of Hong Kong, known as Apstar, and Loral are both using the Apstar-5 satellite launched in June 2004.
Schwartz said Loral also hopes to recertify the Satmex 6 satellite at its Palo Alto plant in time for an early 2006 launch aboard an Ariane 5 rocket. The Loral-built satellite has been in storage at its launch site since October 2003. The satellite’s owner, Satmex, has filed for bankruptcy protection in Mexico, and some of its U.S. creditors want the company to seek Chapter 11 protection in New York.
Schwartz said a New York bankruptcy filing would be preferable, because it might be less time-consuming than a Mexican bankruptcy procedure. Otherwise, he said, Loral is neutral on the subject.
Loral uses three Satmex 5 transponders and will have access to four Satmex 6 transponders under an agreement that Loral and Satmex recently concluded, but which will need to be approved by whatever bankruptcy court is given Satmex jurisdiction.