Chinasat objects to Loral's disclosure statement

By Jeff Pines

Washington, Nov. 29 - China National Postal and Telecommunications Appliances Corp. and China Telecommunications Broadcast Satellite Corp., together known as Chinasat, objected to Loral Space & Communications Ltd.'s disclosure statement because it does not mention the possibility that Chinasat may have an $81.6 million claim against the satellite maker, potentially shaving recoveries for some creditors by nearly half.

In a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York, Chinasat said it and Loral are trying to resolve the dispute but if the negotiations fail and Loral rejects the contracts Chinasat will make a claim of at least $81.6 million against Loral.

"Nevertheless, the disclosure statement, while describing in great detail both the amount and the formula for calculating estimated recoveries under the amended plan, fails to provide any information concerning this risk other than the general boilerplate caveats that actual recoveries may be higher or lower than projected," Chinasat said.

The disclosure statement estimates general unsecured claims to be $117 million. Factoring in the potential Chinasat claim, and general unsecured creditors's potential recovery would drop to 19.4% from 33%, Chinasat said.

Chinasat hired Loral to build and deliver a satellite with a launch date in 1998 and provide ground equipment, software and services.

Loral completed the satellite and Chinasat said it is nearly completely paid for.

Chinasat said it has paid Loral $134.41 million, including $79.12 million for the satellite, $2.5 million under the service contract and $52.5 million as a deposit for the launch but Loral has been unable to get the necessary U.S. government permits to transfer the satellite the Chinasat, the company said.

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

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