Milan, Italy — Loral Space and Communications bowed to a shareholder protest March 21 — and a threatened lawsuit — by agreeing to open to other shareholders what had been planned as the exclusive sale of Loral preferred stock to the company’s biggest owner, MHR Capital Partners.
In addition to limiting the already dominant role of MHR in Loral, the March 21 agreement with dissident shareholders will cost Loral up to $2.25 million, according to a copy of the agreement filed with the U.S. Securities and Exchange Commission.
As part of the agreement, the management of New York-based Loral will not have to admit that it committed any wrongful act when it offered $300 million in preferred Loral stock exclusively to MHR even after other shareholders asked to participate in the sale.
Shareholders owning what they said was more than 18 percent of Loral’s stock had filed suit in the court of Chancery of the State of Delaware alleging that Loral management had breached its “duty of loyalty” to shareholders in proceeding with the sale of preferred shares to MHR.
The agreement, while representing a retreat on the part of Loral management and MHR, will put protesting shareholders’ allegations to the test. MHR will offer these shareholders the preferred shares that it had agreed to buy, but at different price levels above the initial price made available to MHR.
Loral’s cash payment to the dissident shareholders will rise or fall depending on the final sales price. The agreement between Loral and shareholders filing suit is pending court approval in Delaware.