UPDATE 1-Loral shareholders get official committee
Thu Mar 24, 2005 12:13 PM ET
NEW YORK, March 24 (Reuters) - A U.S. bankruptcy court trustee has appointed an official equity committee for shareholders in bankrupt Loral Space & Communications Ltd. (LRLSQ.OB: Quote, Profile, Research) , a significant victory for stockholders in the satellite operating company.
Jeff Swarts, a Loral shareholder who helped organize a group to press for a court-mandated equity committee, on Thursday said he had received a letter from U.S. Trustee Pamela Lustrin, saying she is giving Loral shareholders at least one official committee.
Loral shares, traded over-the-counter, surged on the news, doubling to 23 cents from their opening at 11.5 cents. Shares settled recently to trade at 18.5 cents, up 60 percent.
Official designation means Loral is required to pay for the costs of legal and financial representation for shareholders. It follows the publication of an examiner's report last week that said Loral had undervalued assets in bankruptcy reorganization.
Swarts said it was "obvious" the examiner's report showed the Loral stockholders had met the criteria to appoint an official committee.
The group has fought for more than a year to gain official status, having spent its own money to file repeated bankruptcy court filings in opposition to moves by well-financed Loral creditor lawyers and financial advisors.
In a typical bankruptcy, stockholders are granted an equity committee if the assets of a bankrupt enterprise exceed its liabilities, meaning lower-ranked equity holders may recieve a recovery under a restructuring plan.
However, Loral stockholders were encouraged when an independent examiner appointed at their request determined Loral had undervalued some assets by up to $463 million and ascribed no value to others in its reorganization plan.
The report, by examiner Harrison Goldin's firm, was issued March 14.
"This is what we have been fighting for for almost two years," said Swarts. "It was the examiner's report that showed that the company was not hopelessley insolvent, which is the standard for a committee."
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