Loral Bankruptcy Exit Is Delayed Until November – Company Works To Settle Outstanding Contract Disputes with Globalstar, Others

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Loral Space and Communications will miss its scheduled October exit from Chapter 11 bankruptcy but likely will emerge in November, company spokesman John McCarthy said Oct. 28.

New York-based Loral meanwhile is rushing to settle outstanding contract disputes with customers and decide — as is allowed under U.S. Chapter 11 law — whether to accept or reject contracts that were on its books before it sought bankruptcy court protection in mid-2003.

The company recently told the court it has been unable to resolve a contract dispute with Globalstar that has stalled work on eight spare Globalstar satellites. Loral has resolved a dispute with Space Communications Corp. of Japan and also has won court approval for its Loral Skynet satellite services subsidiary to contract with its Space Systems/Loral satellite manufacturing arm to build a telecommunications satellite to meet a U.S. regulatory deadline.

As of Oct. 28 Loral had not agreed to assume a contract with satellite-telephone constellation operator Globalstar LLC of Milpitas, Calif., to refurbish seven Globalstar satellites that have been in storage for several years, and to build an eighth. According to documents submitted to the New York bankruptcy court overseeing Loral’s Chapter 11 proceeding, Loral had agreed to perform that work once Globalstar had committed to launching the spacecraft.

Loral was the managing partner of Globalstar before Globalstar’s bankruptcy and subsequent purchase, in April 2004, by Thermo Capital Partners.

Globalstar in early October announced it had signed a contract with Starsem S.A. of France for the launch of four fleet-replenishment satellites in early 2007 aboard Russia’s Soyuz rocket, with an option for a second launch. The Euro-Russian Starsem venture markets Soyuz launches commercially.

A backup launch contract was signed with the Euro-Russian Eurockot Launch Services GmbH venture of Bremen, Germany, which markets the Russian-built Rockot vehicle.

Globalstar spokesman Dean Hirasawa said after the launch contracts were signed that Globalstar had eight satellites in storage and ready for launch. The initial Globalstar constellation, which operates in low Earth orbit, was launched in 1998 and 1999.

But according to the bankruptcy court documents, only seven of these satellites are built, and even these will need refurbishment by Loral before they can be launched.

Some of the new parts needed for the satellites will take months to order and install, according to Globalstar statements to the court. “New Globalstar has attempted for more than 10 months to direct [Space Systems/Loral ] to proceed with the necessary work,” so far without success, Globalstar told the court.

In an Oct. 7 statement to the court, Loral said the Globalstar issue was among the last remaining unresolved contract issues. Loral said it would ask the court’s permission to reject the contract. Since then, the two sides have continued to negotiate the issue, according to industry officials.

Loral has had a longstanding dispute with another customer, Space Communications Corp. (SCC) of Tokyo, relating to a mid-1990s failure of the Loral-built Superbird 1 telecommunications satellite.

In 2003, SCC asked Loral to take charge of extended mission operations support for another Loral-built satellite in which SCC had an interest. McCarthy declined to identify the satellite , but SCC is a part-owner of Japan’s MBSAT S-band mobile communications satellite, launched in early 2004.

Loral told the court that the new mission-support work for SCC is “the only way that it can attempt to restore its relationship with SCC” and enhance Loral’s reputation among prospective Japanese customers. The bankruptcy court recently approved the Loral satellite mission support work, expected to last 15 years.

The court also granted a Loral request to approve Loral Skynet’s contract with Space Systems/Loral for construction of the Telstar 11N satellite, to be launched in 2007 to Skynet’s 37.5 degrees west orbital slot. The contract was signed in time to meet a U.S. Federal Communications Commission deadline.

McCarthy said the Telstar 11N is Loral’s fifth satellite contract award in 2005 after awards for telecommunications satellites from ICO Satellite Management LLC, TerraStar Networks Inc., PanAmSat Corp. and XM Satellite Radio.