Analysts Say SS/L Could Be Sold If EchoStar Acquires All Loral Assets
By Nick Jonson
August 22, 2003
Space Systems/Loral, the satellite manufacturing division of Loral Space & Communications Ltd., likely would be sold or shut down if EchoStar Communications Corp. acquires all of the company's assets, according to some analysts.
It's unlikely EchoStar would want to enter the satellite manufacturing market given the downturn affecting the U.S. telecommunications industry, analysts said.
EchoStar, based in Littleton, Colo., provides direct broadcast satellite (DBS) television products and services to customers worldwide via its Dish network.
"I don't see why anyone would be interested in getting into the satellite manufacturing business," senior space analyst Marco Caceres of the Teal Group said. "Space Systems/Loral [SS/L] would likely be sold. There's no demand for the satellites that Loral has been spending a great deal of R&D money on over the last five years or so."
Loral began experiencing financial difficulties about two years ago following its entry into the satellite services market (DAILY, Aug. 4).
In July, the company filed for Chapter 11 bankruptcy protection and agreed to sell half its satellite fleet to Intelsat Ltd. for $1.1 billion cash (DAILY, July 16). The satellites include Telstars 4,5,6 and 7 and Telstar 13, which was launched Aug. 8, as well as Telstar 8, scheduled to be launched in the first half of next year.
The satellites provide voice, video and data to customers in North America. Loral continues to operate its remaining fleet of five satellites that serve markets in South America, Europe and Asia.
Counteroffer
Earlier this week, Loral officials announced that EchoStar had made an informal counteroffer for the satellites. EchoStar also expressed interest in acquiring the rest of Loral's assets, including SS/L.
"EchoStar's interest reconfirms the value of assets assembled by Loral over the years," Loral Chairman and CEO Bernard Schwartz said in an Aug. 19 statement. "We will consider all bids received very carefully, noting that our current plan is to emerge from the bankruptcy process with a viable, ongoing satellite services and manufacturing business."
EchoStar attorneys quoted by the Reuters news agency and CBS MarketWatch said the company is willing to pay $1.45 billion for all of Loral's assets.
The attorneys were present at a bankruptcy hearing in the U.S. Bankruptcy Court for the Southern District of New York. During the hearing, Judge Robert Drain scheduled an Oct. 20 auction for all of Loral's assets, including the North American satellites. The deadline for submitting bids is Oct. 15.
Drain also recognized Intelsat as the lead bidder for the satellites and ruled that Intelsat could keep a $20 million break-up fee if its bid is unsuccessful.
EchoStar spokesman Steven Cox said EchoStar "has not yet made a determination about whether it will participate in the bidding process in the Loral bankruptcy case."
Not surprising
Phil McAlister, director of space and telecommunications for the Futron Corp., said he was not surprised a counteroffer was made for the Loral satellites, but he was surprised at who made it.
"When the Intelsat/Loral deal was announced, I thought someone would make a counteroffer. But EchoStar was not on my short list," he said. "EchoStar wasn't even on my long list."
The fact that Intelsat made an offer was not surprising, he said. "Intelsat needs those satellites, needs them badly. And Loral needs the money," McAlister said. "I don't think EchoStar needs them." Intelsat does not operate satellites serving the North American market.
If EchoStar acquires all of Loral's assets, it's hard to imagine EchoStar Chairman and CEO Charlie Ergen deciding to keep SS/L, McAlister said.
"EchoStar is a media company and Charlie Ergen has always wanted it to be known as a media company," he said. "The Loral satellite line is a good product. They just haven't seen an order in a while. It could be shut down or someone else would have to buy those assets. It puts the whole company in play." |
