Loral’s Acquisition Completed, Moving On Up As Well As Moving Out Announcements, Too

Loral Space & Communications Inc. [NASDAQ: LORL] has announced the CAD 3.25 billion acquisition of Telesat Canada by Loral and the Public Sector Pension Investment Board (PSP Investments), including the transfer of Loral’s fixed satellite services business Loral Skynet, has been completed. Loral and PSP Investments acquired 100 percent of the stock of Telesat Canada from BCE for CAD 3.25 billion and the assumption of CAD 160 million of Telesat debt. To fund Loral’s purchase of 64 percent of Telesat, Loral contributed its Loral Skynet assets and US $178 million of cash. The new Telesat funded debt facilities of US $2,665 million and CAD 226 million and paid off the outstanding debt at Telesat and Loral Skynet.




Due to the proceeds of the debt financing being predominately in US dollars and the Telesat purchase price in Canadian dollars, in December 2006, Loral and PSP Investments entered into a series of foreign currency hedge transactions in order to insulate the companies from foreign currency fluctuations and to maintain favorable exchange rates. As a result, Loral realized approximately $123 million of foreign currency gains in one series of transactions and reduced the need for Telesat to borrow an additional $225 million in another series. These currency transactions effectively funded the approximately 16 percent appreciation in the value of Telesat in US dollar terms since the transaction was announced.




Additionally, Daniel Goldberg will continue on as the president and chief executive officer of Telesat, and the company will remain HQ’d in Ottawa. Over the next six months, Loral will reduce the number of employees at their headquarters. Some critical functions at their satellite manufacturing subsidiary, Space Systems/Loral, will also be consolidated. The restructuring will reduce the company’s corporate expenses by as much as $10 million annually, after incurring about $7 million of one-time cash cost. The current president and chief operating officer, Eric J. Zahler, will leave effective November 30th and Richard J. Townsend will relinquish his position as CFO, but will remain with the company for about six months during the transition period. The new CFO will be Harvey B. Rein, currently Loral’s VP and controller, and Mr. Richard P. Mastoloni will become senior vice president of finance and treasurer—New York, New York