Loral And U.S. Government Settle 1996 Chinese Launch Matter

SPACEWAR

U.S.-built Intelsat 708 satellite crashed just after lift off from the Xichang launch center in the People�s Republic of China. This was the third launch failure in 38 months involving the PRC�s Long March series of rockets carrying U.S.-built satellite payloads. It also was the first commercial launch using the new Long March 3B. These events attracted intense attention from the international space launch insurance industry, and eventually led to a review of the PRC launch failure investigation by Western aero-space engineers. Image/Caption - Select Committee Of The United States House Of Representatives

New York - Jan 11, 2002
Loral Space & Communications has reached a settlement with the U.S. government in a case relating to the company's involvement in a review of a Chinese rocket launch failure in 1996. Loral was informed by the Justice Department has terminated its investigation of the company and has declined to pursue the matter further.

Loral has agreed to pay a civil fine of $14 million to the State Department without admitting or denying the government's charges. The cost of the fine (approximately $0.04 per share) will be reflected in Loral's 2001 fourth quarter results. Under the terms of the agreement the fine is to be paid over seven years, without interest, resulting in a cash impact annually of approximately $2 million.

Loral also has strengthened its export compliance program. The company's past and future compliance costs, as agreed to with the government, will total at least $6 million, $2 million of which has already been expensed.

Loral's chairman and chief executive officer, Bernard L. Schwartz, said:

"Loral and its employees are patriotic, law-abiding citizens and we take this matter very seriously. We historically have had an excellent security record and are committed to vigorous compliance with export control laws. The company has instituted an extensive new training program, significantly expanded staff, and greatly improved oversight in the area of export control.

PLA soldiers were involved in recovering wreckage from the Intelsat 708 launch crash. Members of the Intelsat and Loral team in the PRC were not allowed by PRC officials to visit the site until late in the afternoon of the launch failure. Examination of recovered debris by Loral engineers in the U.S. determined that the satellite�s encryption devices were not recovered from the crash site. Image/Caption - Select Committee Of The United States House Of Representatives
"This matter grew out of the activities of an Independent Review Committee (IRC) set up to inform the insurance industry about the causes of a 1996 Chinese rocket failure. The IRC was organized at the request of the insurance underwriters and was composed of representatives from Loral and five other satellite and satellite launch companies.

"Upon learning that a copy of the IRC's preliminary report was mistakenly sent to the Chinese by a Loral employee, the company made an immediate and voluntary disclosure to the State Department noting that an effort had been made to delete all sensitive material in advance. Nonetheless, Loral accepts full responsibility for the matter and expresses regret for its failure to obtain appropriate State Department approval."

DEBT BUZZ

Loral Reschedules Billion Dollar Debt

New York - Jan 7, 2002
Loral Space & Communications has taken early action to extend to 2005 the maturities of both of its major bank credit facilities, the $600 million Loral SpaceCom facility and the $494 million Loral Satellite facility. In addition, the company obtained significant improvements in the amortization schedules. All lenders agreed to these revised terms which were signed off the day before Christmas.

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