Posted on 09/19/2003 1:47:09 PM PDT by anymouse
Loral Space & Communications Ltd. , which filed for bankruptcy in July as part of an agreement to sell six satellites, said one of these satellites malfunctioned Friday morning, becoming, at least temporarily, inoperable.
Loral, which agreed to sell the six satellites aimed at North America to Intelsat Ltd. for up to $1.1 billion in cash, said Telstar 4 suffered a short circuit of its primary power system. Loral and Lockheed Martin Corp. the craft's builder, are evaluating the problem to determine if the Telstar 4 can be repaired.
Telstar 4 is insured for $141 million, Loral said. Most customers who use the satellite have switched to Telstar 5 and Telstar 6, two other Loral craft that Intelsat plans to buy.
If Telstar is permanently disabled, the resulting effect on the cornerstone of Loral's Chapter 11 reorganization plan, selling its North American fleet, is unclear. Loral spokesman John McCarthy declined to comment. The company's lead bankruptcy attorney, Stephen Karotkin of Weil Gotshal & Manges LLP, wasn't immediately available.
Susan Gordon, an Intelsat spokeswoman, said its pact with Loral lets it reduce the purchase price for Loral's North American fleet under certain conditions.
"Our asset purchase agreement does have room for contingencies," she said.
Loral's insurance coverage on Telstar 4 would affect the size of a reduction, if there is one.
Under Loral's current bankruptcy plan, the company would continue to own five satellites that serve customers in South America, Europe and Asia. Loral will also continue to build satellites. Intelsat, in fact, has agreed to make a $100 million down payment for a new satellite after it buys the six North American craft.
Telstar 4 was launched in September 1995. Loral already had plans to launch another satellite, Telstar 8, in mid-2004 to take over Telstar 4's coverage area, but under that plan Telstar 4 was still going to provide service.
This is the second mechanical problem that fixed-satellite operators have faced in the last three months. PanAmSat Corp. reported that two of its satellites, which were both built by Boeing Co., stopped working in July because of problems with their propulsion systems. PanAmSat cut its financial targets in August for the current quarter, citing the problem.
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