Loral Space & Communications has revealed the full extent of the damage caused by the commercial satellite slump in its latest financial results, casting further doubt on whether it can survive Chapter 11 bankruptcy protection as an independent company.

The company's Space Systems satellite manufacturing arm is particularly troubled, with no new orders received since 2001, while its North American satellite fleet, the most valuable part of the company, is now attracting interest from two rival operators.Loral entered Chapter 11 on 15 July as part of a deal under which Intelsat would buy Loral's fleet of six broadcasting satellites over North America for up to $1.1 billion. But now its rival, television broadcaster Echostar, is considering bidding $5 million more, and could pay a further $450 million for the rest of Loral Space Systems and five other satellites.

Both bidders would gain from the takeover, says SG Cowen satellite analyst Tom Watts. "Echostar is doing very well. Its main problem is what to do with all its spare free cash. It could use the Loral fleet to offer high-definition TV to its customers in North America...and it could flip the manufacturing arm to Lockheed Martin for a small amount. It hasn't had any new orders, but it still has a good backlog."

For Intelsat the sale is vital, Watts says: "It will give them a toehold in the world's largest market and in the high-margin video business." He adds that Intelsat's flotation, due in the next 12 months, would be significantly more successful if the company could offer the services of Loral's North American fleet.

After the Intelsat purchase, Space Systems would be left with the remaining satellite fleet and $200 million in cash after debt repayments. Loral reported a net loss of $99 million for the three months to 30 June 2003.

Source: Flight International