Loral files revised plan of reorganization following negotiations

New York, March 22 - Loral Space & Communications Ltd. filed a revised plan of reorganization reflecting negotiations with the creditors committee and the ad hoc committee of Space Systems/Loral trade creditors.

Under the plan, Loral Orion's unsecured creditors will receive 80% of the stock of the reorganized company plus $200 million of preferred stock to be issued by the reorganized Skynet. They will also be able to subscribe to $120 million of Skynet notes.

The parent company's bondholders and some other unsecured creditors will receive 20% of the stock of the reorganized company.

Loral is proposing that its two businesses, satellite manufacturer Space Systems/Loral and satellite services provider Skynet, will emerge from the reorganization intact as separate subsidiaries of the reorganized parent company. Space Systems/Loral will have no debt. The reorganized parent company will be publicly held under current management and will seek listing on a major stock exchange.

The new plan revises the restructuring proposed on Dec. 5 to reflect the negotiations with creditors.

For the previous plan, Angelo Gordon & Co. Inc. and the ad hoc committee of Loral Space & Communications' trade creditors were on the record opposing the plan because they believed their claims were a higher priority than those of the general unsecured claims of Loral Orion but were getting a lower estimated recovery.

Under the new plan, claims will be treated as follows:

* Loral Orion unsecured creditors including holders of its $612.704 million of 10% senior notes due 2006, $36.627 million 11¼% senior notes due 2007 and $49.071 million 12½% senior discount notes due 2007 will receive 80% of the stock of the reorganized company plus $200 million of preferred stock to be issued by the reorganized Skynet. They will also be able to subscribe to $120 million of Skynet notes;

* Holders of Loral Space & Communications' $350 million of 9½% senior notes due 2006 plus $16.625 million of interest owing and some other unsecured creditors will receive 20% of the stock of the reorganized company;

* Holders of claims against Space Systems/Loral and Loral SpaceCom will be paid in full in cash, including interest from the petition date to the effective date of the plan;

* Loral's existing common and preferred stock will be cancelled and holders will receive nothing.

The rights offering of Skynet notes will be backstopped by MHR Fund Management LLC, which will receive 95% of the fee, and P. Schoenfeld Asset Management LLC, which will receive 5%. The fee will be a further $6 million of new notes.

The $200 million of new Skynet preferred stock will pay dividends at 12%, payable in kind in some circumstances, be perpetual, be redeemable at any time at par and not be convertible into stock.

The $126 million of new Skynet notes will be senior secured, pay interest at 14%, payable in kind in some circumstances, mature after 10 years, be redeemable for four years at 110% if the noteholders agree, in year five at 100% at Skynet's option and then with a premium that declines to par in year 10.

The new plan still requires approval by the U.S. Bankruptcy Court for the Southern District of New York.

New York-based Loral filed for bankruptcy on July 15, 2003. Its Chapter 11 case number is 03-41710.

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