Loral shareholders win one victory, press for more
Thu Dec 23, 2004 03:30 PM ET
By Dane Hamilton
NEW YORK, Dec 23 (Reuters) - Battered shareholders in bankrupt Loral Space & Communications (LRLSQ.OB: Quote, Profile, Research) this week are stepping up efforts to get value for their shares after winning a significant bankrupcy court victory late last week.
After months of legal wrangling, the so-called Loral Stockholders Protective Committee won an appeal on Dec. 17 that requires the appointment of an independent examiner to evaluate how Loral's advisors valued the company during the bankruptcy process, according to court papers.
The decision, which was posted Dec. 20 on the U.S. Bankruptcy Court of the Southern District of New York Web site, could lay the groundwork to establish what the shareholders group says is a significant undervaluing of the satellite operator's business in the bankruptcy process.
Loral, which sought Chapter 11 bankruptcy protection in New York in July 2003, has filed a restructuring plan with the court that gives no value to common or preferred stockholders.
But the shareholders group, which says it represents some 10 percent of Loral shares, argued that Loral improperly undervalued its assets, depriving shareholders of value for their holdings in favor of bondholders, who would be awarded the bulk of Loral's new equity when it emerges from Chapter 11 as planned early next year.
The shareholders group repeatedly sought the appointment of an independent examiner to investigate its claims, but the motion was denied by U.S. Bankruptcy Judge Robert Drain, who is presiding over the Loral bankruptcy.
In November, the group appealed Drain's decision to the U.S. District Court, which overturned Drain's decision, saying shareholders met legal requirements for the appointment of an examiner.
The shareholder group says it now plans to step up its efforts to have the court name it as an "official" shareholders committee, a move that would require Loral to pay for its legal and financial advisors, a move that Loral also opposes.
"The shareholders have made a small victory to get an advocate for the truth," said Tony Christ, a Loral shareholder who organized the group. "We are going to continue no matter how much money or how many lawyers are thrown at us."
The decision is a personal victory for Christ, a non-lawyer who has doggedly and near single-handedly argued his case over 18 months without legal counsel. The cantankerous 55-year-old faced batteries of lawyers from Weil, Gotshal & Manges and financial advisors from Greenhill & Co., both of which represent Loral; and Akin, Gump, Strauss, Hauer & Feld, which represents bondholders, all top firms in their field.
Weil, Gotshal attorney Stephen Karotkin said he didn't think the appointment of an examiner "will hold up the company from emerging from bankruptcy." He declined further comment.
The yet-to-be-named examiner, who will have a relatively small initial budget of $200,000, will weigh whether Loral's advisors properly valued its assets. If the examiner concludes that Loral erred, it could force it to restructure a reorganization plan filed in December in bankruptcy court.
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