Loral Faces Damages Claim Of $350 Million
Satellite News 02/10/03
(c) 2001 Phillips Business Information, Inc.
[Just how much 'damage' could have been done by Loral to Alcatel? How many contracts were signed in the last two - three years? Worse, this will drag on through the summer. More likely it is a hang over or spite wrt G*? Oh, Loral - someday (?) the 'overhangs' will be removed. Speaking of which, when will Lockheed do something with its Loral shares? Jeff Vayda]
New York's Loral Space & Communications [LOR] is acknowledging for the first time that claims against it by
France-based Alcatel Space could have a "material" impact on its financial picture.
The change follows an arbitration panel's ruling late last month that Loral violated a partnership agreement with its former
satellite-manufacturing partner. The tribunal assigned to address the claims and counterclaims found that Loral breached
the alliance agreement between the two companies by failing to share information.
Now, the tribunal is requesting further submissions by the parties involved and scheduling hearings to be held this May to
determine if any of the breaches caused Alcatel to suffer injury that is sufficient to warrant damage payments from Loral.
If the tribunal finds that Alcatel sustained damages, there could be a "material adverse effect" on Loral's consolidated
financial position and operating results, Loral officials reported in an 8-K filing with the Securities and Exchange
Commission.
Alcatel is seeking $350 million in damages from Loral. Industry observers questioned whether anything close to that level
of damages could be justified.
William Kidd, a satellite analyst with Lehman Brothers, was skeptical that Alcatel incurred "significant harm."
In a Feb. 3 research note to his clients, Kidd wrote that Alcatel's claim that Loral did not share information is unlikely to
warrant a "significant award" for damages.
However, if the tribunal somehow found adequate reason to slap Loral with hundreds of millions of dollars in damages,
Kidd said the financially struggling company's probability of bankruptcy would rise "dramatically."
"Importantly, Loral's new disclaimer regarding the dispute shows the ruling is quite negative," Kidd wrote. Loral previously
explained in its financial documents with the SEC that the dispute likely would have no material adverse effect on the
company.
Maury J. Mechanick, attorney with the Washington office of White & Case LLP said the arbitration tribunal's finding that
the partnership agreement was breached by Loral does not mean in and of itself that Alcatel suffered any "actual
damages."
"Resolution of that issue will depend upon the tribunal's assessment of factual submissions and legal arguments yet to be
made by both Alcatel and Loral on the damages question and, as such, it is not possible to make any predication as to the
outcome at this time," Mechanick said. --Paul Dykewicz
(William Kidd, Lehman Brothers, 212/526-4849; Maury Mechanick, White & Case, 202/626-3635 |
