Press Release
Source: Loral Space & Communications Ltd.
Loral Reaches Agreement to Sell Six Satellites to
Intelsat for up to $1.1 Billion
Tuesday July 15, 7:47 am ET
Files Voluntary Chapter 11 Petition as Precondition to Transaction
NEW YORK--(BUSINESS WIRE)--July 15, 2003--Loral Space & Communications Ltd. (NYSE:
LOR - News)--
Will Reorganize Around Five-Satellite Network And Satellite Manufacturing Operations
Sale Proceeds To Be Used To Significantly Reduce Debt
Space Systems/Loral To Receive Order For New Satellite From Intelsat
Loral Space & Communications Ltd. (NYSE: LOR - News) today announced that it has reached
a definitive agreement to sell its six North American telecommunications satellites to Intelsat,
Ltd. for up to $1.1 billion in cash, subject to certain price adjustments related to Loral's ability
to achieve specified operating parameters prior to the close.
In conjunction with and as a precondition to this sale, Loral and certain of its subsidiaries today
filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Loral intends to reorganize around its remaining fleet of five satellites and its satellite
manufacturing operations, allowing the company to go forward as a viable enterprise with
opportunities for future growth. The Chapter 11 filing, made today in the U.S. Bankruptcy Court
for the Southern District of New York, will enable Loral to sell the six North American satellites
free and clear of any encumbrances.
It was also announced today that Intelsat has agreed to order a new satellite from Loral and will
make a $100 million down payment on that order upon closing of the sale of the North
American satellites.
Loral expects to use most of the proceeds from the sale of the North American satellites to
repay all $959 million of its outstanding secured bank debt. The transaction is expected to
close within four to six months, pending Bankruptcy Court and regulatory approval. The
agreement provides for the sale of Telstars 4, 5, 6 and 7, which are currently in orbit, as well as
Telstars 13 and 8, which are scheduled to be launched later this year and in the first half of
next year, respectively.
Through its Skynet subsidiary, Loral will continue to operate an integrated fixed satellite and
network services business using its fleet of five telecommunications satellites and its
established VSAT/fiber global network infrastructure. The Loral fleet will consist of the Telstar
10, 11 and 12 satellites currently in orbit and Telstar 18/Apstar V and Telstar 14/Estrela do Sul,
which are scheduled to be launched within the next nine months. This fleet serves markets in
South America, Europe and Asia that the company believes are currently underserved and have
potential for growth.
Loral will also continue to own and operate Space Systems/Loral (SS/L), a world-class leader
in the design and manufacture of satellites and satellite systems for commercial and
government applications and one of only five such manufacturers in the world.
Bernard L. Schwartz, chairman and chief executive officer of Loral, said: "Loral's principal
challenge has been to overcome the effects of the prolonged economic downturn that led to the
lack of satellite manufacturing orders across the industry and a slowdown in growth of fixed
satellite services (FSS). We have concluded that a sale of the North American satellites,
coupled with a Chapter 11 reorganization, represents the best way to resolve the financial
difficulties that have resulted from the downturn. We will be able to use the substantial cash
proceeds generated by this transaction to reduce our secured debt, while allowing Loral to
reorganize around its remaining satellite fleet and satellite manufacturing business."
Loral believes that it currently has adequate cash on hand and cash flow from operations to
continue normal operations and customer support. Accordingly, the company has decided not
to obtain third-party debtor-in-possession (DIP) financing at this time. Loral will continue to
evaluate its liquidity needs on an ongoing basis.
On June 30, Loral announced that it had collected $55 million in cash from Intelsat, resulting
from an acceleration of a receivable for agreed-upon orbital performance payments. Separately,
the company also announced on June 30 that it had reached a settlement with Alcatel resolving
all outstanding issues between them including a contract dispute that had been in arbitration.
Today's actions follow a confluence of events that have severely affected Loral's financial
performance in recent years. These include overcapacity in the existing global satellite
universe, which created a severe drought in orders for new satellites; the collapse of the capital
markets, which hampered the ability of many of Loral's customers to raise capital for planned
projects and also hindered the company's own plans to raise capital; and a significant reduction
in FSS demand from telecommunications providers, particularly from Internet-related
companies.
Loral currently has approximately $2.1 billion in long-term debt (including the $959 million of
bank debt), resulting mainly from its investments in Globalstar as well as the rapid build-up of
its FSS fleet, which has demonstrated its value over time through its strong cash flow and
EBITDA performance.
Mr. Schwartz said: "Our investment in the North American fleet yielded an attractive return. At
the same time, we are encouraged about the prospects for the FSS fleet that will remain after
the sale is completed. In particular, we believe our markets in South America and Asia are
under-served and have growth potential.
"We also believe that Space Systems/Loral is an attractive asset at a time when the satellite
manufacturing industry worldwide is poised for consolidation and is experiencing early
indications of an upturn in new orders. Our objective for SS/L is to allow it to move forward as
an integrated, ongoing concern with the financial resources it needs to grow."
In addition to the satellite order from Intelsat, SS/L recently was awarded a $113 million
contract to provide batteries and power systems for the International Space Station. Earlier this
year, WildBlue Communications Corp., Denver, Colo. ordered a restart from SS/L of its
WildBlue-1 satellite program.
The company believes that its plan to substantially reduce long-term debt and interest expense
going forward should help address concerns customers and suppliers may have had about its
financial condition. Moreover, one of the benefits of the Chapter 11 process is that the
company's obligations to customers and suppliers made after the filing are treated more
favorably under the Bankruptcy Code than similar obligations made before the filing.
In conjunction with the Chapter 11 filing, Loral will file shortly a motion with the court seeking
approval of procedures for the sale of the six North American satellites. In accordance with
these procedures, the proposed transaction with Intelsat will be subject to higher and better
offers. The company has also filed other customary "First Day Motions" to support its
employees, customers and suppliers. The company expects that employees will continue to
receive their customary salaries and benefits. Suppliers will be paid under normal terms for
goods and services provided on or after the petition filing date of July 15, 2003. Loral today also
began a similar legal proceeding in Bermuda, where it is incorporated.
"We regret deeply the impact that a Chapter 11 filing will have on many of our stakeholders -
particularly our shareholders, who have been so patient and loyal during these turbulent times,"
Mr. Schwartz said. "Loral's senior management has worked ceaselessly to try to avoid such a
filing, but we have reluctantly concluded that the asset sale and debt reduction could only be
achieved through the Chapter 11 reorganization process. We intend to move through this
process as quickly as possible."
Loral Space & Communications is a satellite communications company. It owns and operates
a global fleet of telecommunications satellites used by television and cable networks to
broadcast video entertainment programming, and by communication service providers,
resellers, corporate and government customers for broadband data transmission, Internet
services and other value-added communications services. Loral also is a world-class leader in
the design and manufacture of satellites and satellite systems for commercial and government
applications including direct-to-home television, broadband communications, wireless
telephony, weather monitoring and air traffic management. For more information, visit Loral's
web site at www.loral.com.
This document contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. In addition, Loral Space & Communications Ltd. or its representatives have made
or may make forward-looking statements, orally or in writing, which may be included in, but are
not limited to, various filings made by the company with the Securities and Exchange
Commission, press releases or oral statements made with the approval of an authorized
executive officer of the company. Actual results could differ materially from those projected or
suggested in any forward-looking statements as a result of a wide variety of factors and
conditions, which have been described in the section of the company's annual report on Form
10-K for the fiscal year ended December 31, 2002, entitled "Certain Factors That May Affect
Future Results," and the company's other filings with the Securities and Exchange
Commission. The reader is specifically referred to these documents.
Contact:
Loral Space & Communications Ltd.
Jeanette Clonan or John McCarthy, 212-697-1105
Source: Loral Space & Communications Ltd. |
