PRIVATE stylefile:c:!temp!~pr00001cfc000100242bd4017.STY PARIS — Loral’s effort to raise $300 million by issuing preferred shares is motivated not by an impending strategic purchase but by concerns that its existing satellite-manufacturing and transponder leasing businesses remain credible to prospective customers, according to Loral Chief Executive Michael B. Targoff .

New York-based Loral Space and Communications’ plan to issue preferred stock in that amount to its principal shareholder, MHR Fund Management LLC, was protested by other Loral shareholders, who said they were kept out of the deal and wanted to be part of it.

Loral has suspended the preferred-stock sale to MHR and is evaluating offers from other shareholders.

In an occasionally contentious shareholder meeting held Nov. 14, Targoff declined to respond to one shareholder’s complaint that the deal with MHR was concluded “behind our backs.”

In its quarterly financial report to the U.S. Securities and Exchange Commission (SEC), Loral said that as of Sept. 30 it had $321 million in cash and short-term investments.

The company reported that revenue for the first nine months of 2006 totaled $592 million, up 38 percent over the same period a year ago, when Loral was still in Chapter 11 bankruptcy. The company reported a net loss of $26.1 million for the period.

Loral’s Space Systems/Loral satellite manufacturing division accounted for 83 percent of revenue , with most of the rest coming from the Skynet satellite-fleet operator, which has four satellites in orbit and one — Telstar 11N — on order and scheduled for launch in 2008.

To complete Telstar 11N and to handle its $1.17 billion in backlog, Space Systems/Loral is adding personnel and plant capacity and needs substantial cash. Targoff said the satellite manufacturing side should have an average cash balance of up to $200 million to fund its operations.

Space Systems/Loral’s cash balance recently was improved following an $18 million cash payment by International Launch Services (ILS), settling a four-year-old dispute regarding refunds of deposits Loral made on launch contracts it later canceled.

The ILS payment will end a series of claims and counterclaims related to satellite-manufacturer Space Systems/Loral’s cancellation of four launch contracts with McLean, Va.-based ILS, which markets the Russian Proton-M rocket.

Targoff said Space Systems/Loral’s substantial cash requirements, plus the fact that customers feel more comfortable with financially strong suppliers, had  motivated the proposed preferred-stock sale.

Targoff said Space Systems/Loral’s satellite backlog does not include up to five satellites that might be ordered by direct-broadcast television broadcaster EchoStar Communications Corp. of Englewood, Colo.

EchoStar has made modest payments to Loral to begin design of the satellites to satisfy EchoStar’s guarantees to the U.S. Federal Communications Commission (FCC) on satellite-production milestones. These milestones must be met to avoid a cancellation of EchoStar’s license to operate the satellites.

“This has not made a meaningful contribution to our revenue,” Targoff said. “We are performing to milestones for their FCC obligations.”

In its SEC filing, Loral said its four Skynet satellites were 74 percent full as of Sept. 30. Targoff said Skynet needs to grow internally and externally given the current state of the global fixed satellite services industry, which is consolidating.

If Loral cannot find attractive add-ons for Skynet, a sale of the division will be considered, Targoff said.

The Skynet satellite operations business generated revenues of $126 million for the first nine months of 2006, a 9 percent increase over a year earlier. The revenue included a $14.9 million payment from Boeing Co. following Boeing’s decision to cancel its Connexion service providing broadband Internet links to commercial airlines.

Backlog at Skynet was $358 million at Sept. 30, down 20 percent from a year earlier in part because $37 million in future sales were removed with Boeing’s Connexion cancellation.

Loral said in its SEC filing that it paid Hong Kong-based APT Satellite Holdings $9.1 million in September to take possession of two transponders on the Telstar-18 that APT had been scheduled to use until 2009. APT owns most of the capacity on the satellite, which APT refers to as Apstar-5.

Loral recently has taken title to two C-band and two Ku-band transponders on the Satmex 6 satellite operated by Satmex of Mexico. Targoff said this business, which will add to Skynet’s available capacity over North America, had only just started.

Loral is a shareholder in Satmex and industry officials have speculated that the Mexican operator, which is emerging from its own bankruptcy proceedings in Mexico and the United States, could be a Loral acquisition target. Targoff declined to specify whether Loral was focusing on a given geographic region for future growth.