Loral creditor groups split over Intelsat sale amendment

By Jeff Pines

Washington, March 15 - Depending upon where you stand, an amendment to Loral Space & Communications Ltd.'s agreement to sell six satellites to Intelsat Ltd either solves all of the company's problems, or it does not.

In motions filed with bankruptcy court for the Southern District of New York, the Bank of America as agent for the secured creditors supported the amendment and the official committee of unsecured creditors opposed it.

If the sale closes, Loral will get $1.03 billion, or enough money to pay off its pre-petition secured creditors, Bank of America said.

The negotiations were conducted at "arm's length" and without approval of the amendment, there will be no sale, which means no one will get paid.

The unofficial committee protested the Intelsat sale from the start arguing Loral was selling off its "crown jewels" for much less than they were worth. It noted Loral's original projection of getting $1.1 billion is now down to what it estimates to be $970 million.

It believes the transaction, through amendment 4, has become an entirely different transaction that could expose the company to significant liability.

Another major issue is what will happen to the insurance settlement from the failure of Loral's Telstar 4 satellite back in September. Originally, settlement proceeds, which could go as high as $141 million, was supposed to go to Loral, but amendment 4 requires the cash to go to Intelsat "for no discernible reason," the committee said.

At the very least, the committee wants the judge to deny the transfer of the insurance settlement proceeds to Intelsat, it said.

A hearing is scheduled for March 16.

The company filed for Chapter 11 on July 15. Loral's Chapter 11 case number is 03-41710.

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