SC 13D

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. _________)*

LORAL SPACE & COMMUNICATIONS INC.

(Name of Issuer)

Common Stock, par value $0.01 per share

(Title of Class of Securities)

543881106

(CUSIP Number)

J. Kevin Ciavarra
Highland Crusader Offshore Partners, L.P.
Two Galleria Tower
13455 Noel Road, Suite 800
Dallas, Texas 75240
(972) 628-4100

(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)

October 23, 2006

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. þ

Note. Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

CUSIP No. 543881106  Page 2  of  15 Pages 

1	NAMES OF REPORTING PERSONS: Highland Crusader Offshore Partners, L.P., a Bermuda limited partnership
	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
	98-0346514
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a)   þ
	(b)   o
3	SEC USE ONLY:
4	SOURCE OF FUNDS (SEE INSTRUCTIONS):
	WC
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):
	o
6	CITIZENSHIP OR PLACE OF ORGANIZATION:
	Bermuda
		7	SOLE VOTING POWER:
NUMBER OF			0
SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			981,879
EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			0
WITH		10	SHARED DISPOSITIVE POWER:
			981,879
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
	981,879
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):
	o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
	4.9%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):
	PN

CUSIP No. 543881106  Page 3  of  15 Pages 

1	NAMES OF REPORTING PERSONS: Highland Multi-Strategy Onshore Master SubFund, L.L.C., a Delaware limited liability company
	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
	20-5237162
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a)   þ
	(b)   o
3	SEC USE ONLY:
4	SOURCE OF FUNDS (SEE INSTRUCTIONS):
	WC
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):
	o
6	CITIZENSHIP OR PLACE OF ORGANIZATION:
	Delaware
		7	SOLE VOTING POWER:
NUMBER OF			0
SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			100,000
EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			0
WITH		10	SHARED DISPOSITIVE POWER:
			100,000
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
	100,000
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):
	o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
	0.5%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):
	OO

CUSIP No. 543881106  Page 4  of  15 Pages 

1	NAMES OF REPORTING PERSONS: Highland Capital Management, L.P., a Delaware limited partnership
	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
	75-2716725
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a)   þ
	(b)   o
3	SEC USE ONLY:
4	SOURCE OF FUNDS (SEE INSTRUCTIONS):
	AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):
	o
6	CITIZENSHIP OR PLACE OF ORGANIZATION:
	Delaware
		7	SOLE VOTING POWER:
NUMBER OF			0
SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			1,081,879
EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			0
WITH		10	SHARED DISPOSITIVE POWER:
			1,081,879
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
	1,081,879
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):
	o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
	5.4%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):
	IA/PN

CUSIP No. 543881106  Page 5  of  15 Pages 

1	NAMES OF REPORTING PERSONS: Strand Advisors, Inc., a Delaware corporation
	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
	95-4440863
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a)   þ
	(b)   o
3	SEC USE ONLY:
4	SOURCE OF FUNDS (SEE INSTRUCTIONS):
	AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):
	o
6	CITIZENSHIP OR PLACE OF ORGANIZATION:
	Delaware
		7	SOLE VOTING POWER:
NUMBER OF			0
SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			1,081,879
EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			0
WITH		10	SHARED DISPOSITIVE POWER:
			1,081,879
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
	1,081,879
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):
	o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
	5.4%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):
	CO

CUSIP No. 543881106  Page 6  of  15 Pages 

1	NAMES OF REPORTING PERSONS: James Dondero
	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a)   þ
	(b)   o
3	SEC USE ONLY:
4	SOURCE OF FUNDS (SEE INSTRUCTIONS):
	AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):
	o
6	CITIZENSHIP OR PLACE OF ORGANIZATION:
	United States
		7	SOLE VOTING POWER:
NUMBER OF			0
SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			1,081,879
EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			0
WITH		10	SHARED DISPOSITIVE POWER:
			1,081,879
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
	1,081,879
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):
	o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
	5.4%
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):
	IN

CUSIP No. 543881106  Page 7  of  15 Pages 

Item 1. Security and Issuer.

     This Schedule 13D (the “Schedule”) relates to the common stock, par value $0.01 per share (the “Common Stock”) of Loral Space & Communications Inc., a Delaware corporation (the “Issuer”), and is being filed pursuant to Rule 13d-1 under the Securities Exchange Act of 1934. The address of the principal executive office of the Issuer is 600 Third Avenue, New York, NY 10016.

Item 2. Identity and Background.

     (a) The names of the persons filing this statement (the “Reporting Persons”) are Highland Capital Management, L.P., a Delaware limited partnership (“Highland Capital”), Strand Advisors, Inc., a Delaware corporation (“Strand”), James Dondero, a citizen of the United States, Highland Crusader Offshore Partners, L.P., a Bermuda limited partnership (“Crusader”) and Highland Multi-Strategy Onshore Master SubFund, L.L.C., a Delaware limited liability company (“Multi-Strategy SubFund”). Information is also given with respect to Highland Crusader Fund GP, L.P., a Delaware limited partnership (“Crusader Fund GP”), Highland Crusader Fund GP, LLC, a Delaware limited liability company (“Crusader Fund GP LLC”), Highland Multi-Strategy Master Fund, L.P., a Bermuda limited partnership (“Master Fund”), Highland Multi-Strategy Fund GP, L.P., a Delaware limited partnership (“Multi-Strategy GP”) and Highland Multi-Strategy Fund GP, L.L.C., a Delaware limited liability company (“Multi-Strategy GP LLC”). The directors and executive officers of Strand and Multi-Strategy SubFund are named on Appendix I hereto.

     (b) The address of Highland Capital, Strand, Mr. Dondero, Crusader and Multi-Strategy SubFund is Two Galleria Tower, 13455 Noel Road, Suite 800, Dallas, Texas 75240. The address of Crusader Fund GP, Crusader Fund GP LLC, Master Fund, Multi-Strategy GP, Multi-Strategy GP LLC is c/o Highland Capital Management, L.P., Two Galleria Tower, 13455 Noel Road, Suite 800, Dallas, Texas 75240. The business address of each director and executive officer of Strand and Multi-Strategy SubFund is provided on Appendix I hereto.

     (c) This statement is filed on behalf of the Reporting Persons. Crusader Fund GP is the general partner of Crusader. Crusader Fund GP LLC is the general partner of Crusader Fund GP. Master Fund is the managing member of Multi-Strategy SubFund. Multi-Strategy GP is the general partner of Master Fund. Multi-Strategy GP LLC is the general partner of Multi-Strategy GP. Pursuant to management agreements, Highland Capital exercises all voting and dispositive power with respect to securities held by Crusader and Multi-Strategy SubFund. Strand is the general partner of Highland Capital. Mr. Dondero is the President and a director of Strand.

     The principal business of Highland Capital, a registered investment adviser, is acting as investment adviser to various entities, including Crusader and Multi-Strategy SubFund. The principal business of Strand is serving as the general partner of Highland Capital. The principal business of Mr. Dondero is serving as the President and a director of Strand. The principal business of Crusader Fund GP is serving as the general partner of Crusader. The principal business of Crusader Fund GP LLC is serving as the general partner of Crusader Fund GP. The principal business of Master Fund is serving as the managing member of Multi-Strategy SubFund. The principal business of Multi-Strategy GP is serving as the general partner of Master Fund. The principal business of Multi-Strategy GP LLC is serving as the general partner of Multi-Strategy GP. The principal business of Crusader and Multi-Strategy SubFund is purchasing, holding and selling securities for investment purposes. The present principal occupation or employment of each director and executive officer of Strand and Multi-Strategy SubFund and the name, principal business and address of any corporation or other organization in which such employment is conducted is provided on Appendix I hereto.

CUSIP No. 543881106  Page 8  of  15 Pages 

     (d) and (e) During the last five years, none of the Reporting Persons, nor, to the knowledge of the Reporting Persons, any of Crusader Fund GP, Crusader Fund GP LLC, Master Fund, Multi-Strategy GP, Multi-Strategy GP LLC, the persons controlling the Reporting Persons, or the directors or executive officers of Strand and Multi-Strategy SubFund, has been convicted in a criminal proceeding or was a party to a civil proceeding, in either case of the type specified in Items 2(d) or (e) of Schedule 13D.

     (f) Highland Capital, Strand, Crusader Fund GP, Crusader Fund GP LLC, Multi-Strategy SubFund, Multi-Strategy GP and Multi-Strategy GP LLC are organized under the laws of the State of Delaware. Crusader and Master Fund are organized under the laws of Bermuda. Mr. Dondero is a citizen of the United States. The citizenship of each director and executive officer of Strand and Multi-Strategy SubFund is provided on Appendix I hereto.

Item 3. Source and Amount of Funds or Other Consideration.

     Commencing in December 2005, Crusader has been acquiring, in the ordinary course of business in secondary market transactions, shares of Common Stock using Crusader’s working capital. Crusader has purchased approximately 981,879 shares of Common Stock for a total of approximately $26,576,066.

     On August 30, 2006, Multi-Strategy SubFund purchased 100,000 shares of Common Stock in secondary market transactions for $2,650,000 using Multi-Strategy Subfund’s working capital.

Item 4. Purpose of Transaction.

     On October 19, 2006, the Issuer filed a Current Report on Form 8-K disclosing that on October 17, 2006, the Issuer entered into a Securities Purchase Agreement with MHR Fund Management LLC (“MHR”) pursuant to which MHR or its affiliates (“the “MHR Purchasers”) will purchase from the Issuer shares of two newly created series of convertible perpetual preferred stock of the Issuer (the “MHR Transaction”). Specifically, according to the Form 8-K, the MHR Purchasers will purchase 136,526 shares of Series A Cumulative 7.50% Convertible Perpetual Preferred Stock and 858,486 shares of Series B Cumulative 7.50% Convertible Perpetual Preferred Stock for an aggregate purchase price of $300,000,098.

     MHR currently owns, in the aggregate, approximately 36% of the outstanding Common Stock and three of MHR’s employees or officers are directors of the Issuer’s eight-member board of directors, one of whom, who is MHR’s President, serves as the non-executive chairman of such board. MHR also owns approximately 38.3% of the Series A 12% Non-Convertible Preferred Stock and 44.6% of the 14% Senior Secured PIK Notes of Loral Skynet Corporation, one of the Issuer’s principal wholly owned subsidiaries.

CUSIP No. 543881106  Page 9  of  15 Pages 

     The Reporting Persons believe that the terms of the MHR Transaction were not negotiated on an arm’s length basis, are not fair to or in the best interest of the Issuer’s stockholders as a whole, and unfairly benefit MHR at the cost of the Issuer’s other stockholders. To the knowledge of the Reporting Persons, the convertible stock that the Issuer has agreed to sell to MHR was never offered to, or discussed with the market at large or other significant stockholders of the Issuer to determine if better market terms might be available or if those stockholders might be willing to purchase such convertible stock. The Reporting Persons believe that in negotiating the MHR Transaction, MHR used its insider status to enrich itself at the expense of the Issuer’s other stockholders. In particular, the MHR Transaction: (1) increases MHR’s already substantial ownership interest in the Issuer; (2) has terms with respect to coupon, strike price and maturity (or lack thereof) which the Reporting Persons believe bear no resemblance to typical market terms or recent transactions; and (3) provides MHR with an additional seat on the Issuer’s board of directors, which allows for further control by MHR and strengthens MHR’s ability to capture the upside at the expense of outside public stockholders. The Reporting Persons believe that by accepting the MHR transaction and apparently not insisting on a competitive marketing process, the Issuer’s independent directors failed to meet their fiduciary duty of care and failed to protect the stockholders’ best interests. The Reporting Persons believe that MHR will not let other stockholders participate in this transaction because it knows how attractive the terms of the deal are from the standpoint of the purchaser.

     The MHR Transaction robs non-participating stockholders from the upside of a turnaround that the Reporting Persons believe is obvious and demonstrable at this time due to recent satellite orders among other things. In fact, the Reporting Persons believe that the Issuer is poised for recovery but the MHR Transaction steers the upside to existing controlling stockholders at the expense of other public stockholders.

     The Reporting Persons believe that the Issuer could effect a substantially similar sale of convertible preferred stock to stockholders other than MHR on terms which are more advantageous to the Issuer and all of its stockholders than those of the MHR Transaction. Moreover, the Reporting Persons demand that both the Issuer’s board of directors and MHR attempt to improve the terms of the MHR Transaction from the Issuer’s standpoint. Accordingly, the Reporting Persons are willing to underwrite a $300 million convertible perpetual preferred stock transaction on similar terms that are more favorable to the Issuer, including but not limited to, a lower coupon rate and/or a higher conversion price than proposed in the MHR Transaction. Most importantly, the proposed replacement transaction would be open to all significant public stockholders except MHR and its affiliates. Highland Capital is willing to backstop the $300 million by agreeing to purchase all remaining convertible preferred stock not purchased by the other public stockholders.

     The Reporting Persons are aware that there is a general lack of transparency related to the satellite manufacturing business. This lack of transparency makes the valuation of transactions by companies such as the Issuer extremely difficult for non-insiders. These matters further indicate that MHR, which is in a position to have such competitive information, used this information to negotiate a transaction that was to MHR’s advantage, at a cost to the Issuer’s other stockholders.

     Accordingly, if the Reporting Persons are unable to effect a purchase of convertible stock from the Issuer on terms more favorable to the Issuer than those of the MHR Transaction, the Reporting Persons will remain dedicated to encouraging good corporate governance principles as they apply to the Issuer and to protecting the value of their investment in the Issuer and will consider various plans or proposals which relate to or could result in the transactions or changes contemplated by Items 4(a) through 4(j) of Schedule 13D. Such plans or proposals could include, without limitation, (i) acquisitions of additional shares in the open market or otherwise, (ii) potentially seeking possible changes in the

CUSIP No. 543881106  Page 10  of  15 Pages 

present board of directors and management of the Issuer, (iii) making one or more proposals for adoption by stockholders of the Issuer (including proposals to improve the Issuer’s corporate governance or to amend the Issuer’s organizational documents), (iv) making proposals to the Issuer’s board of directors and management, (v) seeking to call a special meeting of stockholders to elect directors or approve stockholder proposals, and soliciting proxies or consents in connection therewith, (vi) proposing an extraordinary corporate transaction, such as a merger, reorganization, recapitalization or liquidation, involving the Issuer or any of its subsidiaries, or sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries, which transaction may involve the Reporting Persons or third parties unrelated to the Reporting Persons, (vii) alone or in conjunction with others, seeking to acquire the Issuer or substantial assets or outstanding securities of the Issuer, including by merger, tender offer or stock or asset purchase, or (viii) selling all or a portion of the shares now owned or hereafter acquired by the Reporting Persons. In the interim and before formulating any definitive plan or proposal, the Reporting Persons may communicate with other stockholders or third parties regarding the Issuer, its business, prospects and alternatives to maximize stockholder value and to otherwise protect Highland Capital’s interest in the Issuer.

     On October 23, 2006 Highland Capital sent a letter to the Special Committee of the Issuer’s board of directors, which letter is attached hereto as Exhibit 99.2 and incorporated herein by reference.

Item 5. Interest in Securities of the Issuer.

     Each of the Reporting Persons and Crusader Fund GP, Crusader Fund GP LLC, Master Fund, Multi-Strategy GP and Multi-Strategy GP LLC declares that the filing of this statement shall not be construed as an admission that such person is, for the purposes of Sections 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended, the beneficial owner of any securities covered by this statement.

     (a) As of October 23, 2006, each of the Reporting Persons may be deemed to beneficially own an aggregate of 1,081,897 shares of Common Stock, representing approximately 5.4% of the Common Stock outstanding as of October 23, 2006 (based on the number of shares of Common Stock outstanding as contained in Issuer’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 7, 2006).

     Each of Crusader Fund GP, Crusader Fund GP LLC, Multi-Strategy GP and Multi-Strategy GP LLC and each director and executive officer of Strand and Multi-Strategy SubFund (other than Mr. Dondero) beneficially owns zero shares of Common Stock. Notwithstanding its jointly filed statement on Schedule 13G dated August 30, 2006 and filed on September 7, 2006 (which statement this Schedule 13D corrects), Master Fund beneficially owns zero shares of Common Stock. While Master Fund is the managing member of Multi-Strategy SubFund, pursuant to a management agreement between Highland Capital and Multi-Strategy SubFund, Highland Capital has all voting and dispositive powers with respect to securities held by Multi-Strategy SubFund.

     (b)

	Sole		Shared		Sole		Shared
	Voting		Voting		Dispositive		Dispositive
	Power		Power		Power		Power
Highland Crusader Offshore Partners, L.P. (1)		0		981,879		0		981,879
Highland Crusader Fund GP, L.P. (1)		0		0		0		0
Highland Crusader Fund GP, LLC (1)		0		0		0		0
Highland Multi-Strategy Onshore Master SubFund, L.L.C. (2)		0		100,000		0		100,000
Highland Multi-Strategy Master Fund, L.P. (2)		0		0		0		0
Highland Multi-Strategy Fund GP, L.P. (2)		0		0		0		0

CUSIP No. 543881106  Page 11  of  15 Pages 

	Sole		Shared		Sole		Shared
	Voting		Voting		Dispositive		Dispositive
	Power		Power		Power		Power
Highland Multi-Strategy Fund GP, L.L.C. (2)		0		0		0		0
Highland Capital Management, L.P. (3)		0		1,081,879		0		1,081,879
Strand Advisors, Inc. (3)		0		1,081,879		0		1,081,879
James Dondero (3)		0		1,081,879		0		1,081,879

(1)	Crusader Fund GP is the general partner of Crusader and Crusader Fund GP LLC is the general partner of Crusader Fund GP. However, pursuant to a management agreement between Highland Capital and Crusader, Highland Capital has all voting and dispositive powers with respect to securities held by Crusader.
(2)	Master Fund is the managing member of Multi-Strategy SubFund, Multi-Strategy GP is the general partner of Master Fund and Multi-Strategy GP LLC is the general partner of Multi-Strategy GP. However, pursuant to a management agreement between Highland Capital and Multi-Strategy SubFund, Highland Capital has all voting and dispositive powers with respect to securities held by Multi-Strategy SubFund.
(3)	As a result of the relationships described herein, Highland Capital, Strand and Mr. Dondero may be deemed to be the indirect beneficial owners of the shares of Common Stock beneficially owned by Crusader and Multi-Strategy SubFund. Highland Capital, Strand and Mr. Dondero expressly disclaim beneficial ownership of the securities reported herein, except to the extent of their pecuniary interest therein.

     (c) On August 30, 2006, Multi-Strategy SubFund purchased 100,000 shares of Common Stock at a per share price of $26.50 in open market purchases. Except as otherwise described herein, no transactions in the Common Stock were effected during the past sixty days or since the most recent filing on Schedule 13D, whichever is less, by the Reporting Persons or, to the knowledge of the Reporting Persons, any of Crusader Fund GP, Crusader Fund GP LLC, Master Fund, Multi-Strategy GP and Multi-Strategy GP LLC, or the persons controlling the Reporting Persons.

     (d) Except as otherwise described in this Schedule, to the knowledge of the Reporting Persons, only the Reporting Persons have the right to receive or the power to direct the receipt of dividends from, or proceeds from the sale of, the shares of Common Stock covered by this statement.

     (e) Inapplicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

     In order to secure its obligations to Barclays Bank PLC (“Barclays”) under a confirmation agreement evidencing a forward contract transaction to which it is a party, Multi-Strategy SubFund entered into an Investment Property Security Agreement effective as of August 10, 2006 (the “Security Agreement”) pursuant to which Multi-Strategy SubFund pledged its Common Stock to Barclays as collateral. In the event of a default under the confirmation agreement, Barclays would have (i) the right to dispose of the pledged Common Stock, (ii) the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, such Common Stock and (iii) the right to vote or consent with respect to such Common Stock.

     To effectuate its pledge, Multi-Strategy SubFund entered into an Account Control Agreement dated as of August 10, 2006 (the “Control Agreement”) relating to Multi-Strategy SubFund’s securities

CUSIP No. 543881106  Page 12  of  15 Pages 

account with Barclays Capital Inc. (the “Securities Intermediary”) in which the pledged Common Stock is held. Pursuant to the Control Agreement, Securities Intermediary will comply with Barclay’s entitlement orders with respect to the securities account. Securities Intermediary will also comply with Multi-Strategy SubFund’s entitlement orders with respect to the securities account until notified by Barclays in writing that Barclays is exercising exclusive control over the account, and provided that the market value of assets in the securities account is at least $53,158,854 (or such other agreed upon amount) both before and after compliance with such orders. The summaries of the Security Agreement and the Control Agreement contained in this Item 6 are qualified in their entirety by reference to the Security Agreement and the Control Agreement, copies of which are filed herewith as Exhibits 99.3 and 99.4, respectively, and incorporated herein by reference.

     Except as otherwise described in this Schedule, there are no other contracts, arrangements, understandings or relationships (legal or otherwise) between the Reporting Persons or any of the persons listed in Appendix I and between such persons and any person with respect to any shares of Common Stock of the Issuer, including but not limited to transfer or voting of any of the Common Stock, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies.

Item 7. Material to be Filed as Exhibits.

     Exhibit 99.1 Joint Filing Agreement, dated as of October 23, 2006, entered into by and among Highland Capital, Strand, James Dondero, Crusader, Multi-Strategy SubFund and Master Fund.

     Exhibit 99.2 Letter from Highland Capital to the Special Committee of Issuer's Board of Directors, dated October 23, 2006.

     Exhibit 99.3 Investment Property Security Agreement, dated as of August 10, 2006, between Multi-Strategy SubFund and Barclays.

     Exhibit 99.4 Account Control Agreement, dated as of August 10, 2006, among Multi-Strategy SubFund, Barclays and Securities Intermediary.

CUSIP No. 543881106  Page 13  of  15 Pages 

SIGNATURE

     After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

     Date: October 24, 2006

HIGHLAND CRUSADER OFFSHORE PARTNERS, L.P.
By:	Highland Crusader Fund GP, L.P.,
	its general partner
By:	Highland Crusader Fund GP, LLC,
	its general partner
By:	Highland Capital Management, L.P.,
	its sole member
By:	Strand Advisors, Inc., its general partner
	By:	/s/ James Dondero
		James Dondero, President
HIGHLAND MULTI-STRATEGY ONSHORE MASTER SUBFUND, L.L.C.
By:	Highland Multi-Strategy Master Fund L.P.,
	its managing member
By:	Highland Multi-Strategy Fund GP, L.P.,
	its general partner
By:	Highland Multi-Strategy Fund GP, L.L.C.,
	its general partner
By:	Highland Capital Management, L.P.,
	its sole member
By:	Strand Advisors, Inc., its general partner
	By:	/s/ James Dondero
		James Dondero, President

CUSIP No. 543881106  Page 14  of  15 Pages 

	HIGHLAND MULTI-STRATEGY MASTER FUND, L.P.
	By:	Highland Multi-Strategy Fund GP, L.P.,
		its general partner
	By:	Highland Multi-Strategy Fund GP, L.L.C.,
		its general partner
	By:	Highland Capital Management, L.P.,
		its sole member
	By:	Strand Advisors, Inc., its general partner
		By:	/s/ James Dondero
			James Dondero, President
	HIGHLAND CAPITAL MANAGEMENT, L.P.
`	By:	/s/ James Dondero
		James Dondero, President
	STRAND ADVISORS, INC.
	By:	/s/ James Dondero
		James Dondero, President
	/s/ James Dondero
	James Dondero

CUSIP No. 543881106  Page 15  of  15 Pages 

APPENDIX I

     The name of each director and executive officer of Strand and Multi-Strategy SubFund is provided below. Unless otherwise indicated, the business address of each person named below is Two Galleria Tower, 13455 Noel Road, Suite 800, Dallas, Texas 75240. Each person named below is a citizen of the United States of America. The present principal occupation or employment of each person named below, and the name, principal business and address of any corporation or other organization in which such employment is conducted, is provided below.

	Present Principal Occupation or Employment
Name	and Business Address (if applicable)
Strand Advisors, Inc.
James D. Dondero, Director	President
Mark K. Okada	Executive Vice President
Patrick H. Daugherty	Secretary
Todd A. Travers	Assistant Secretary
J. Kevin Ciavarra	Assistant Secretary
Michael Minces	Assistant Secretary
James Plohg	Assistant Secretary
Brian Lohrding	Treasurer
Highland Multi-Strategy Onshore Master SubFund, L.L.C.
James D. Dondero	President
Mark K. Okada	Executive Vice President
Patrick H. Daugherty	Secretary
Todd A. Travers	Assistant Secretary
J. Kevin Ciavarra	Assistant Secretary
Michael Minces	Assistant Secretary
James Plohg	Assistant Secretary
Brian Lohrding	Treasurer

EX-99.1

EXHIBIT 99.1

JOINT FILING AGREEMENT

     In accordance with Rule 13d-1(k) promulgated under the Securities Exchange Act of 1934, as amended, the persons named below agree to the joint filing on behalf of each of them of a Statement on Schedule 13D (including amendments thereto) with regard to the common stock of Loral Space & Communications Inc., a Delaware corporation, and further agree that this Joint Filing Agreement be included as an Exhibit to such joint filings. In evidence thereof, the undersigned, being duly authorized, hereby execute this Joint Filing Agreement as of October 24, 2006.

HIGHLAND CRUSADER OFFSHORE PARTNERS, L.P.
By:	Highland Crusader Fund GP, L.P.,
	its general partner
By:	Highland Crusader Fund GP, LLC,
	its general partner
By:	Highland Capital Management, L.P.,
	its sole member
By:	Strand Advisors, Inc., its general partner
	By:	/s/ James Dondero
		James Dondero, President
HIGHLAND MULTI-STRATEGY ONSHORE MASTER SUBFUND, L.L.C.
By:	Highland Multi-Strategy Master Fund L.P.,
	its managing member
By:	Highland Multi-Strategy Fund GP, L.P.,
	its general partner
By:	Highland Multi-Strategy Fund GP, L.L.C.,
	its general partner
By:	Highland Capital Management, L.P.,
	its sole member
By:	Strand Advisors, Inc., its general partner
	By:	/s/ James Dondero
		James Dondero, President

	HIGHLAND MULTI-STRATEGY MASTER FUND, L.P.
	By:	Highland Multi-Strategy Fund GP, L.P.,
		its general partner
	By:	Highland Multi-Strategy Fund GP, L.L.C.,
		its general partner
	By:	Highland Capital Management, L.P.,
		its sole member
	By:	Strand Advisors, Inc., its general partner
		By:	/s/ James Dondero
			James Dondero, President
	HIGHLAND CAPITAL MANAGEMENT, L.P.
`	By:	/s/ James Dondero
		James Dondero, President
	STRAND ADVISORS, INC.
	By:	/s/ James Dondero
		James Dondero, President
	/s/ James Dondero
	James Dondero

EX-99.2

EXHIBIT 99.2

October 23, 2006

VIA FACSIMILE (212) 338-5600
AND FEDERAL EXPRESS

Special Committee of the Board of Directors
Loral Space & Communications Inc.
600 Third Avenue
New York, NY 10016
Attention: Arthur Simon and John D. Harkey, Jr.

Re: Proposed Sale of Preferred Stock

Dear Members of the Special Committee of the Board of Directors:

     Highland Capital Management, L.P. and its affiliates own more than five percent of Loral Space & Communications Inc.’s common stock, and we want to offer to purchase the convertible preferred stock you recently announced you are selling to MHR Fund Management LLC, but on terms that are more beneficial to Loral.

     We were extremely disappointed to read about the Securities Purchase Agreement for the proposed issuance of $300,000,000 of two newly created series of convertible perpetual preferred stock to MHR. In this transaction, it appears that, as Loral’s largest stockholder, MHR is using its insider position to enrich itself to the detriment of Loral and other stockholders. As best as we can tell, neither Loral nor the Special Committee of the Board of Directors made any efforts (1) to consult other stockholders as to whether they might be interested in purchasing securities on competitive terms or (2) to make the proposed issuance a competitive process to ensure that the transaction is the best possible available to Loral.

     We are surprised that so-called “independent” directors could give unanimous recommendation to such a transaction, given that the insider nature of the negotiation between Loral and MHR makes this proposed investment a magnet for private and governmental scrutiny and stockholder litigation in the post-Sarbanes Oxley age. For example, according to CNNMoney.com, on October 18, just one day after the Securities Purchase Agreement was signed, SEC Commissioner Cox commented that investigations of insider trading is an increasing area of enforcement attention. The deal struck by MHR and Loral smacks of insider trading because of MHR’s position with respect to Loral. It is a mystery to us why you have put yourselves in the crosshairs of possible litigation and regulatory action by failing to exercise your fiduciary duties for the good of all stockholders and by approving this transaction.

Special Committee of the Board of Directors
October 23, 2006
Page 2

     We believe this proposed transaction is a disservice to all stockholders that are not within the MHR umbrella. It reeks of self-dealing, self-interest and is contrary to established market principles of fairness. That you have associated yourselves with this questionable transaction by approving it under a cloak of ignorance would make you equally culpable. One of the precepts of the Securities Purchase Agreement is that Loral’s Board of Directors approved the MHR transaction after it was recommended by the Special Committee of the Board of Directors, and that this recommendation stated that the terms of the MHR transaction are fair, from a financial point of view, to Loral and its stockholders (other than MHR) and, taken as a whole, are no less favorable, from a financial point of view, than Loral could obtain from an unrelated third party. Obviously, the Special Committee of the Board of Directors was mistaken, because the offer we make to Loral in this letter shows that Loral can obtain terms of a similar transaction that, taken as a whole, are more favorable, from a financial point of view, to Loral and its stockholders.

     Here are a few reasons why we think this deal is not in the best interest of Loral and its non-MHR stockholders:

1.	The coupon, conversion price and perpetual nature of the investment bear no resemblance to typical market terms or recent transactions. Further, Loral has offered only one investor (and its affiliates) the very investor-favorable terms of the proposed transaction, and they apparently have not been made available to other significant stockholders in order to allow them to maintain their pro-rata ownership share.
2.	The additional seat on Loral’s Board of Directors to be provided to an MHR nominee as part of the transaction further consolidates control of Loral by MHR, which we believe will lead to future mistreatment of the remaining Loral stockholders. This fact is exacerbated by a provision of the proposed transaction that would allow for the appointment of two additional “independent” board seats, filled by persons nominated by MHR, if Loral fails to make future dividend payments. Indeed, this $300,000,000 deal negotiated exclusively with MHR appears to have been designed to shore up MHR control over Loral and to potentially further other non-arm’s length dealings between MHR and Loral.
3.	Loral has apparently negotiated this MHR-favorable transaction without consulting with other Loral stockholders or even with other potential, unrelated investors who might reasonably be willing to purchase the convertible preferred stock on better terms.

     What we have seen in the referenced Securities Purchase Agreement is an indictment of many of the problems of the American financial system. Should an investor holding a plurality of the shares improve its position to a majority of the shares without consultation and consent of the other stockholders? Are the fiduciary duties of independent directors so pliable that they can be convinced that a deal conceived and approved by the minority in private is the best for all public stockholders? Should independent directors hide behind Delaware law to protect them

Special Committee of the Board of Directors
October 23, 2006
Page 3

when making “best business judgment at the time” decisions when the open market is not canvassed?

     We suggest that the answer to each of the above questions is unquestionably “no.”

     In light of this troubling situation regarding a unilateral investment in Loral by MHR, we propose to offer Loral the same $300,000,000 investment under improved economic terms. These improved economic terms include, but are not limited to, a lower coupon or higher conversion price, or both. In addition, we would make the investment open to all other significant Loral stockholders, but would specifically exclude MHR and its affiliates. The limit on MHR’s participation in our proposal is wholly due to its demonstrated inability and/or unwillingness to consider the interests of all stockholders. Finally, Highland would backstop any remaining investment not absorbed by other stockholders.

     One of the conditions to closing the sale of the convertible preferred stock under the terms of the Securities Purchase Agreement is that the Special Committee of the Board of Directors deliver its recommendation of the transaction to Loral’s Board of Directors. Since this provision was included in the executed Securities Purchase Agreement, we assume (and we certainly hope) that this is a meaningful condition, so that the Special Committee of the Board of Directors will not deliver its recommendation to the full Board of Directors if the Special Committee no longer believes that the terms of the MHR transaction are superior or equal to the terms that could be obtained from a party other than MHR. We implore the Special Committee to withhold the delivery of its final recommendation to the full Board of Directors, given the superior offer made in this letter.

     Given the expedited nature of MHR’s intention to close the transactions described in the Securities Purchase Agreement, we demand an immediate response to the proposal made in this letter.

     Please contact the undersigned immediately to further discuss the offer made by Highland in this letter.

Regards,

J. Kevin Ciavarra
Highland Capital Management, L.P.
Officer of its General Partner and General Counsel

EX-99.3

Exhibit 99.3

INVESTMENT PROPERTY SECURITY AGREEMENT

     THIS INVESTMENT PROPERTY SECURITY AGREEMENT (this “Security Agreement”) is entered into as of August 10, 2006, between HIGHLAND MULTI-STRATEGY ONSHORE MASTER SUBFUND, L.L.C., a Delaware limited liability company (“Highland”), and BARCLAYS BANK PLC (“Secured Party”).

     WHEREAS, at the time of the execution of this Security Agreement, Secured Party and Highland have entered into a transaction evidenced by a “long form” Confirmation dated as of July 28, 2006 between Secured Party and Highland (the “Agreement”); and

     WHEREAS, in connection with the Agreement, Highland has agreed to grant a security interest in certain collateral as hereinafter described as security for its obligations and indebtedness (the “Obligations”) under the Agreement and this Security Agreement; and

     NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

     1. Terms. Terms defined in the Agreement have the same meanings when used herein unless otherwise defined herein or the context hereof otherwise requires. Certain terms used herein are defined in Appendix I hereto, which is incorporated herein. Terms not defined herein (including Appendix I) or in the Agreement which are defined in the New York Uniform Commercial Code, as in effect on the date hereof (the “UCC”), have the meanings specified in the UCC, and the definitions specified in Article 9 of the UCC control in the case of any conflicting definitions in the UCC. The singular number includes the plural and vice versa. Captions of Sections do not limit the terms of such Sections.

     2. Security Interest. To secure the timely payment and performance in full of the Obligations in accordance with the Agreement and this Security Agreement, Highland grants to Secured Party a security interest (the “Security Interest”) in all right, title and interest of Highland in, to and under the following investment property of Highland, whether now owned, arising, existing, or hereafter acquired (the “Collateral”) subject only to any liens to secure normal fees and commissions owed to the Securities Intermediary by Pledgor (which shall be the sole obligation of Pledgor and not in any way an obligation of Secured Party) with respect to the operation of the Account and for the purchase price of Assets ( as defined in 2(a) below) which will be held in the Account (“Permitted Liens”),:

          (a) The Account, Highland’s security entitlements now or in the future carried in the Account, and all property now or hereafter held in the Account (collectively, the “Assets”), specifically including but not limited to all cash, investment property, documents, instruments, general intangibles, certificated and uncertificated securities, securities in book entry form, mutual funds, U.S. Government and state obligations, and deposit accounts, together with all property, certificates, options, rights or other distributions issued as an addition to, in substitution or in exchange therefor, or on account thereof;

          (b) all investment property and other property, rights or interests of any description at any time issued or issuable or held in the Account or any other securities account as an addition to, in substitution or exchange for, with respect to, incident to or in lieu of the Assets or with respect to, incident to or in lieu of the Collateral (i) due to any dividend, stock-split, stock dividend or distribution on dissolution, on partial or total liquidation, or other corporate reorganization; or for any other reason; (ii) in connection with a reduction of capital, capital surplus or paid-in surplus; or (iii) in connection with any spin-off, split-off, reclassification, readjustment, merger, consolidation, sale of assets, combination of shares or any other plan of distribution affecting the entities which have issued or are obligated with respect to any of the Assets;

     (c) any subscription or other rights or options issued in connection with the Assets, including, but not limited to preemptive rights and, if exercised by Highland, all new investment property acquired by Highland upon exercise of such rights, which shall immediately be assigned and delivered to Secured Party and held under the terms of this Security Agreement in the same manner as the investment property originally pledged hereunder;

     (d) all financial assets and cash balances in or credited to the Account or any other securities account included in the Collateral; and

     (e) all distributions, proceeds, monies, income and benefits arising from, by virtue of, or payable with respect to, any of the property described in this Section.

     3. Concerning Any Securities Intermediary. Highland irrevocably consents to and requests that each Securities Intermediary enter into a Control Agreement with Secured Party pursuant to which the Securities Intermediary agrees that it will (a) upon request by Secured Party identify on the records of the Securities Intermediary Secured Party as the entitlement holder with respect to the Security Entitlements, and (b) whether or not Secured Party has made the request specified in clause (a), comply with entitlement orders originated by Secured Party without further consent by Highland.

     4. Representations. Highland represents to Secured Party as follows: (a) Highland is the legal and beneficial owner of the Collateral and the only entitlement holder with respect to any of the Security Entitlements; (b) all Collateral constituting a financial asset is duly authorized and issued, fully paid, and nonassessable, and any securities account or commodity account to which any of the Collateral has been credited has been duly and validly established, and all documentary, stamp, or other taxes or fees owing in connection with the issuance, transfer or grant of the security interest in the Collateral have been paid; (c) no dispute, right of setoff, counterclaim or defense which has not been effectively waived exists with respect to any part of the Collateral, except as granted pursuant to the Account Agreement; (d) the Collateral is owned by Highland free of any hypothecation, lien, charge, encumbrance or security interest or purchase right or option on the part of any third person in such Collateral or the proceeds thereof except the Security Interest, and except as granted pursuant to the Account Agreement; (e) there are no restrictions upon the transfer of any of the Collateral, other than as may appear on the face of any security certificates constituting part of the Collateral, nor are there any financing statements on file in any office covering any part of the Collateral except any in favor of Secured Party; and (f) Highland has the right to transfer or grant a security interest in the Collateral free of any encumbrances other than the Security Interest and without obtaining the consent of any person or entity other than Secured Party.

     5. Covenants. Highland covenants to do the following: (a) from time to time promptly execute, assign, endorse and deliver to Secured Party, if necessary for perfection, all certificated securities constituting part of the Collateral which are not otherwise held in the Account, and all such other assignments, certificates, proxies, entitlement orders, or stock or bond powers as Secured Party may reasonably request in order to evidence, perfect, and enforce the Security Interest and to ensure Secured Party has control of the Collateral; (b) promptly use its best efforts to cause each Securities Intermediary to enter into a Control Agreement. All assignments and endorsements by Highland or acknowledgments by any Securities Intermediary shall be in form and substance mutually satisfactory to Secured Party and Highland; and (c) deliver to Secured Party, on the date hereof, a UCC financing statement for filing which describes the Collateral.

     6. Adjustments and Distributions.

          (a) Unless an Event of Default has occurred, Highland shall be entitled to receive for its own use ordinary cash distributions on the Collateral in an amount not to exceed the Excess Support Amount.

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          (b) If at any time there exists a Deficit Support Amount, then Highland shall promptly deposit cash or investment property (such cash or investment property to conform to the collateral guidelines set forth in the Confirmation) into the Account in an amount equal to such Deficit Support Amount.

     7. Registration of Collateral. At any time after the occurrence and during the continuance of an Event of Default, Termination Event or Additional Termination Event (any such event hereinafter an “Event of Default”), Secured Party, at its option, may have the Collateral registered in its name or that of its nominee, and upon Secured Party’s request, Highland will cause the issuer of the Collateral or, if appropriate, the Securities Intermediary to effect such registration. At such time as all Events of Default have been cured or waived, the right to exercise all voting rights with respect to the Collateral shall revert to Highland.

     8. Remedies. Upon the occurrence of an Event of Default, in addition to any other rights and remedies which Secured Party may then have hereunder, under the UCC or otherwise, Secured Party may, to the extent permitted by applicable law, at its discretion, take any one or more of the following actions, without liability except to account for property actually received by it, and Highland agrees that it is commercially reasonable for Secured Party to do any of the following: (a) if not previously done, transfer to or register in the name of Secured Party or Secured Party’s nominee any of the Collateral or become the entitlement holder with respect to any Security Entitlements, in any case with or without indication of the Security Interest, and whether or not so transferred or registered, receive the income, dividends and other distributions with respect to the Collateral and hold them or apply them to the Obligations in any order of priority selected by Secured Party; (b) exercise or cause to be exercised all voting and other powers with respect to any of the Collateral, including all rights to conversion, exchange, subscription or any other rights, privileges or options pertaining to the Collateral; (c) insure any of the Collateral; (d) exchange any of the Collateral for other property upon a reorganization, recapitalization, dissolution, or other readjustment and, in connection therewith, deposit any of the Collateral with any committee or depository upon such terms as Secured Party may determine; (e) in its name or in the name of Highland demand, sue for, collect or receive any money or property at any time payable with respect to any of the Collateral and, in connection therewith, endorse notes, checks, drafts, money orders, and other instruments constituting proceeds of the Collateral in the name of Highland; (f) reduce its claim to judgment or foreclose or otherwise enforce the Security Interest, in whole or in part, by any available procedure; (g) make any compromise or settlement deemed advisable with respect to any of the Collateral; (h) renew, extend, or otherwise change the terms and conditions of any of the Collateral or the Obligations; (i) take or release any other collateral as security for any of the Collateral or the Obligations; (j) add or release any guarantor, endorser, surety or other party to any of the Collateral or the Obligations; and (k) exercise any other rights it may have hereunder or under the UCC or otherwise. The proceeds of any disposition of the Collateral or other action by Secured Party shall be applied to the Obligations in such order and manner as Secured Party and Highland may determine. Secured Party is under no duty to exercise or to withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to Secured Party in this Security Agreement, and Secured Party is not responsible for any failure to do so or delay in so doing.

     9. Provision with Respect to Certain Damages. Notwithstanding any provision of the Agreement or of this Security Agreement to the contrary, in the event that the Party A Final Payment or the Early Termination Settlement Amount (as the case may be) is zero, then Highland shall be deemed to be in breach of the Agreement, Secured Party shall be deemed to have incurred damages of not less than the absolute value of the difference between the Notional Amount and the Reference Portfolio Value and Secured Party shall be entitled to apply the Collateral against such damages. The parties agree that in these circumstances such amount constitutes a reasonable pre-estimate of the Secured Party’s loss and not a penalty.

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     10. Legal Restrictions. Highland agrees that there may be legal or practical restrictions or limitations affecting Secured Party in any attempts to dispose of certain portions of the Collateral and for enforcement of its rights. Upon the occurrence of an Event of Default, if Secured Party elects to sell any of the Collateral at public or private sale, it may sell the Collateral at such sale subject to investment letter or in any other manner which will not require the Collateral, or any part thereof, to be registered in accordance with any laws or regulations, including but not limited to the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder, or make it necessary to obtain any required approval of the purchase or the purchaser by any governmental agency or officer, at the best price reasonably obtainable by Secured Party at such sale or other disposition in the manner mentioned above. Highland agrees that Secured Party may in its discretion approach a limited number of potential purchasers and that a sale under such circumstances may yield a lower price for the Collateral, or any part or parts thereof, than would otherwise be obtainable if same were either offered to a larger number of potential purchasers, or registered and sold in the open market. At any sale, (a) Secured Party may rely upon the advice and opinion of any member firm of a national securities exchange as to the best price reasonably obtainable upon such private sale thereof, and such reliance shall be conclusive evidence that Secured Party handled such matter in a commercially reasonable manner under applicable law; (b) Secured Party has no obligation to delay sale of any Collateral to permit the issuer thereof to register it for public sale under any applicable federal or state securities laws; and (c) such a sale shall be deemed to have been made in a commercially reasonable manner.

     11. Attorney-in-Fact. Highland appoints Secured Party, its successors and assigns, as Highland’s attorney-in-fact (without requiring it to act as such), with full power of substitution, to do any act which Highland is obligated by this Security Agreement to do, including, but not limited to, the power to do the following upon the occurrence and during the continuance of an Event of Default: (a) become the entitlement holder, sell, dispose of, or issue entitlement orders with respect to the Collateral as herein provided, issue such orders and instructions as are necessary or appropriate to effect the registration of the Collateral on the books of the issuer of the Collateral or of any Securities Intermediary in the name of Secured Party or to effect the sale or disposition of the Collateral; (b) endorse the name of Highland on all checks, drafts, money orders, or other instruments for the payment of monies that are payable to Highland and constitute collections of the Collateral; (c) execute in the name of Highland any schedules, assignments, instruments, documents, financing statements, amendments of financing statements, applications for registration, and other papers deemed necessary or appropriate by Secured Party to perfect, preserve, or enforce the Security Interest; (d) exercise all rights of Highland in the Collateral; (e) make extension agreements with respect to Collateral; (f) make withdrawals from and close deposit accounts and other accounts with any financial institution into which proceeds may have been deposited and apply funds so withdrawn as provided herein; (g) give notice of Secured Party’s rights under this Security Agreement; (h) enter onto Highland’s premises to inspect the Collateral; and (h) do all acts and things and execute all documents in the name of Highland or otherwise, as reasonably necessary, in connection with the preservation, perfection, and enforcement of its rights hereunder. Secured Party agrees it will not exercise its powers as attorney-in-fact until the occurrence of an Event of Default.

     11. Notices. Any notice required or permitted by this Security Agreement shall be in writing and shall be valid, sufficient, and commercially reasonable if deposited in the mail, certified mail, postage prepaid, return receipt requested, or if delivered by telephonic facsimile, overnight courier, or personal delivery addressed to the parties as set forth as follows, unless such address is changed by written notice hereunder:

          (a) If to Secured Party:

4

Barclays Bank PLC
5 The North Colonnade
Canary Wharf
London E14 4BB, England
Attention: Funds Bookrunning
Telephone: +44 (0) 20 777 38063
Facsimile: +44 (0) 20 751 67977
E-mail: funds.deriv@barclayscapital.com

          (b) If to Highland:

Highland Multi-Strategy Onshore Master SubFund, L.L.C.
c/o Highland Capital Management, L.P.
13455 Noel Road, Suite 1300
Two Galleria Tower
Dallas, Texas 75240
Attention: General Counsel
Telephone: (972) 628-4100
Facsimile: (972) 628-4147

Notices shall be effective as follows: (i) if given by mail, on the earlier of (a) three business days following deposit in a post office or other official depositary under the care and custody of the United States Postal Service or (b) actual receipt as shown on the return receipt; (ii) if given by telephone facsimile, on the day of transmission if made within normal business hours of the recipient and otherwise on the following business day; or (iii) if by personal delivery or overnight courier, on the day of delivery to the appropriate address set forth above; or (iv) if delivery is refused by the addressee, on the day of the first presentation thereof to the addressee. Any delivery receipt or affidavit of messenger shall be presumptive evidence of delivery to the addressee or refusal by the addressee to accept delivery, as the case may be. Any address for notice may be changed by written notice to the other party.

     12. Expenses. To the extent permitted by applicable law Highland promptly will pay, upon demand, any reasonable out-of-pocket expenses incurred by Secured Party in connection herewith, including all costs, expenses, taxes, assessments, court costs, reasonable attorneys’ fees, and expenses of sales incurred in connection with the administration of this Security Agreement, the enforcement of the rights of Secured Party hereunder, incurred after the occurrence of an Event of Default or incurred in connection with the obtaining, preservation, or defense of the Security Interest, or the perfection, custody, defense, protection, collection, repossession, enforcement or sale or the Collateral. All such expenses shall become part of the Obligations, shall be payable on demand, and shall bear interest at the highest lawful rate from the date paid or incurred by Secured Party until paid by Highland.

     13. Copy Effective as Financing Statement. A carbon, photographic, or other reproduction of this Security Agreement or a financing statement describing the Collateral shall be sufficient as a financing statement to the full extent permitted by applicable law. Highland authorizes Secured Party to file a financing statement describing the Collateral.

     14. Written Waiver. No waiver, modification, or alteration of any provision of this Security Agreement, nor consent to any departure from the terms hereof, or from the terms of any other document, shall be effective unless such is in writing and signed by Secured Party, and any such waiver shall be effective only for the specific purpose and in the specific instance given. No waiver by Secured Party of any Event of Default shall be deemed to be a waiver of any other or subsequent Event of Default nor shall such waiver be deemed to be a continuing waiver.

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     15. Benefit. This Security Agreement is binding upon and inures to the benefit of Highland and Secured Party, and their respective heirs, legal representatives, successors and assigns, provided, that Highland may not, without the prior written consent of Secured Party, assign any rights, powers, duties or obligations hereunder.

     16. Remedies Cumulative. All rights and remedies of Secured Party hereunder are cumulative of each other and of every other right or remedy which Secured Party may otherwise have at law or in equity or under any other document for the enforcement of the security interest or the enforcement of any duties of Highland or any other party liable in respect to the Obligations. The exercise by Secured Party of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies.

     17. Amendment. This agreement may be amended only by written instrument signed by Highland and Secured Party.

     18. Course of Dealing. No course of dealing between Highland and Secured Party, nor any failure to exercise, nor any delay in exercising, any right, power or privilege of, Secured Party hereunder or under the Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

     19. Severability. The invalidity of any one or more phrases, sentences, clauses, paragraphs or sections hereof shall not affect the remaining portions of this Security Agreement. If any one or more of the phrases, sentences, clauses, paragraphs or sections contained herein are invalid, or operate to render this Security Agreement invalid, then this Security Agreement shall be construed as if such invalid phrase or phrases, sentence or sentences, clause or clauses, paragraph or paragraphs, or section or sections had not been inserted.

     20. Governing Law. The substantive laws of the State of New York govern the validity, construction, enforcement, and interpretation of this Security Agreement. This Security Agreement is performable in New York, New York.

     21. Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HIGHLAND HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF SECURED PARTY IN NEGOTIATION, ADMINISTRATION OR ENFORCEMENT THEREOF.

     22. Satisfaction of Obligations. Upon the satisfaction of all Obligations and the satisfaction of all additional costs and expenses of Secured Party as provided herein, this Security Agreement shall terminate, and Secured Party shall deliver to Highland, at Highland’s expense, such of the Collateral as has not been sold or otherwise applied pursuant to this Security Agreement and appropriate consents to the termination of all Control Agreements and to the revocation of Highland’s consents with respect to such Control Agreements.

[Remainder of Page Intentionally Left Blank; Signatures Begin on Next Page]

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     IN WITNESS WHEREOF, the parties have executed this Security Agreement as of the day and year first above written.

HIGHLAND:
HIGHLAND MULTI-STRATEGY ONSHORE MASTER SUBFUND, L.L.C.
By:	/s/ J. Kevin Ciavarra
	Name:	J. Kevin Ciavarra
	Title:	Assistant Secretary
SECURED PARTY:
BARCLAYS BANK PLC
By:	/s/ Philippe El-Asmar
	Name:	Philippe El-Asmar
	Title:	Managing Director

APPENDIX I

DEFINITIONS

     “Account” means Highland’s security account no. 210-00555 maintained with Broker pursuant to the terms of any agreement for custody, investment management, investment advisory or similar services between Broker and Highland, and includes any other account into which any Collateral is transferred.

     “Account Agreement” means that certain Prime Broker Margin Account Agreement between Highland and Broker with respect to the Account.

     “Broker” means Barclays Capital Inc.

     “Control Agreement” means each agreement among Securities Intermediary, Highland, and Secured Party in form and substance satisfactory to Secured Party in its sole discretion pursuant to which the Securities Intermediary agrees to comply with entitlement orders from Secured Party with respect to the Collateral without further consent by Highland.

     “Deficit Support Amount” means, on any date of determination, the U.S. dollar amount by which the Credit Support Amount exceeds the market value of the Assets.

     “Excess Support Amount” means the portion of the market value of the Assets which exceeds the Credit Support Amount.

     “Securities Intermediary” means each securities intermediary acting in that capacity with respect to any of the Collateral.

     “Security Entitlement” means each security entitlement constituting part of the Collateral.

Appendix I

EX-99.4

Exhibit 99.4

ACCOUNT CONTROL AGREEMENT

     This Account Control Agreement (“Control Agreement”) is entered into as of August 10, 2006, among BARCLAYS BANK PLC (“Secured Party”), HIGHLAND MULTI-STRATEGY ONSHORE MASTER SUBFUND, L.L.C., a Delaware limited liability company (“Pledgor”), and BARCLAYS CAPITAL INC. (“Securities Intermediary”) with respect to a securities account maintained by Pledgor at Securities Intermediary.

Recitals

     A. Securities Intermediary has established a securities account number                      (the “Account”) in New York, New York in the name of Pledgor, and all Assets (as hereinafter defined) held in the Account from time to time shall be registered in the name of the Securities Intermediary or its nominee or indorsed to the Securities Intermediary or its nominee or in blank or credited to another securities account maintained in the name of its nominee and in no case will any of the Assets or any other property credited to the Account be registered in the name of the Pledgor, payable to the Pledgor or specially indorsed to the Pledgor.

     B. Pledgor and Secured Party are entering into a transaction which will be evidenced by a “long form” Confirmation dated as of July 28, 2006 between Secured Party and Highland (the “Confirmation”).

     C. In order to secure its obligations to Secured Party under the Confirmation, Pledgor has granted to Secured Party a security interest in the Account and all investment property, financial assets, securities and other property, including cash, now or hereafter held therein (the “Assets”) pursuant to the terms of an Investment Property Security Agreement dated as of August 10, 2006 between Pledgor and Secured Party. All Assets held in the Account from time to time will be treated as “financial assets” for all purposes of Article 8 of the applicable UCC.

     D. Secured Party, Pledgor and Securities Intermediary are entering into this Control Agreement in order to perfect Secured Party’s security interest in the Account.

Agreement

     1. Agreement for Control.

     (a) Securities Intermediary shall comply with entitlement orders respecting the Account originated by Secured Party without further consent by Pledgor or any other person.

     (b) Until notified by Secured Party in writing that Secured Party is exercising exclusive control over the Account, Securities Intermediary shall be entitled to make trades of Assets held in the Account at the direction of Pledgor and comply with entitlement orders concerning the Account from Pledgor.

     (c) Notwithstanding the provisions of subparagraph (b) above, Securities Intermediary shall only comply with entitlement orders with respect to Assets held in the account where both before and after complying with such entitlement orders, the market value of Assets in the Account is at least equal to the Credit Support Amount. For purposes of this paragraph 1(c), (i) “market value” shall be determined by

Securities Intermediary in a commercially reasonable manner, and (ii) “Credit Support Amount” means $53,158,854, or such other amount as maybe agreed by the Pledgor and Secured Party.

     (d) Upon Securities Intermediary’s receipt of written notice from Secured Party that Secured Party is exercising exclusive control over the Account, Securities Intermediary shall promptly cease complying with entitlement orders or other directions concerning the Account originated by Pledgor (including all recurring or standing orders or directions) and shall make no further distributions to Pledgor.

     (e) Without limiting the foregoing, upon the instructions of Secured Party, Securities Intermediary shall disburse any or all of the Assets in the Account to Secured Party, or sell some or all of the Assets in the Account or act otherwise upon the entitlement orders and other instructions of the Secured Party, and remit all proceeds thereof (less Securities Intermediary’s normal sales charge) to Secured Party.

     2. Name of Account. Secured Party and Pledgor hereby instruct Securities Intermediary, and Securities Intermediary hereby agrees, to change the name of the Account to “Barclays Collateral Account for Highland Multi-Strategy Onshore Master SubFund”. All Assets held in the Account, including cash, shall be treated as Assets under Article 8 of the applicable Uniform Commercial Code.

     3. Securities Intermediary’s Representations and Warranties. Securities Intermediary hereby represents and warrants to Secured Party that:

     (a) The Account does not include checking or credit card features;

     (b) Except for the claims and interest of Secured Party and Pledgor in the Account and liens to secure normal fees and commissions owed to Securities Intermediary by Pledgor (which shall be the sole obligation of Pledgor and not in any way an obligation of Secured Party) with respect to the operation of the Account and for the purchase price of Assets which will be held in the Account (“Permitted Liens”), Securities Intermediary does not know of any claim to or interest in the Account;

     (c) Securities Intermediary has not entered into any agreement with any third party pursuant to which Securities Intermediary has agreed to comply with entitlement orders from that third party with respect to the Account; and

     (d) Securities Intermediary is a self-clearing broker and has not entered into an agreement with a clearing broker under which the clearing broker maintains or carries the accounts of its customers. Further, Securities Intermediary is a “securities intermediary” for purposes of Article 8 of the applicable UCC, and its jurisdiction for purposes of Section 8-110 of such UCC is New York.

     4. Securities Intermediary’s Covenants.

     (a) Securities Intermediary waives and releases all liens, encumbrances, claims and right of set off it may have against the Account, except for Permitted Liens.

     (b) Securities Intermediary shall send copies of all statements and confirmations regarding the Account simultaneously to Pledgor.

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     (c) Securities Intermediary shall promptly notify Secured Party and Pledgor if any person asserts a lien, encumbrance or adverse claim against the Account.

     (d) Securities Intermediary shall report all dividends, interest, gains and other profits with respect to the Account in the name of Pledgor.

     (e) Securities Intermediary agrees that certificated securities held in the Account will be held with proper endorsements to the Securities Intermediary or in blank or Securities Intermediary will promptly deliver possession of such certificated securities to Secured Party.

     (f) Securities Intermediary agrees that it shall, on each business day, use commercially reasonable efforts to send to Secured Party the reports listed in Annex 1 to the contacts and email addresses specified therein, and to the Secured Party and the Pledgor the market value of the Assets held in the Account, as of the close of business on the immediately preceding business day.

     (g) Securities Intermediary agrees to send, promptly after execution of this Control Agreement, evidence that the market value of the Assets held in the Account is at least equal to the Credit Support Amount.

     (h) Securities Intermediary shall not:

     (i) Obtain a lien on the Account for its own benefit, except for Permitted Liens;

     (ii) Agree with any third party that Securities Intermediary will comply with entitlement orders from the third party with respect to the Account;

     (iii) Add checking or credit card features to the Account; or

     (iv) Permit the Pledgor to terminate the Account.

     5. Miscellaneous.

     (a) This Control Agreement does not create any obligation or duty of Securities Intermediary other than those expressly set forth herein. Securities Intermediary shall have no responsibility or liability to Pledgor for complying with entitlement orders concerning the Account originated by Secured Party. Securities Intermediary shall have no duty to investigate or make any determination as to whether a default exists under any agreement between Pledgor or Secured Party prior to complying with an entitlement order originated by Secured Party.

     (b) If this Control Agreement conflicts with any other agreement between Securities Intermediary and Pledgor, the terms of this Control Agreement shall prevail.

     (c) This Control Agreement shall be governed by and construed under the laws of the State of New York, to the jurisdiction of which the parties hereto submit.

     (d) This Control Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns.

     (e) No amendment or termination of this Control Agreement, or waiver of any right hereunder, shall be binding unless it is in writing and is signed by the party to be charged.

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     (f) All notices required or permitted to be given under this Control Agreement will be in writing and will be transmitted by personal delivery, first class mail, overnight courier, or facsimile to the addresses or facsimile numbers on the signature page of this Control Agreement, or to such other addresses or facsimile numbers as the parties hereto may specify from time to time in writing. Notices transmitted by personal delivery or by overnight courier shall be deemed to have been properly given upon actual receipt. Notices sent by telecopy or other electronic means shall be deemed delivered when electronic confirmation of error free receipt is received. Notices sent by first class mail shall be deemed delivered on the earlier of actual receipt or on the fourth business day after deposit in the U.S. mail.

     (g) Paragraph headings are for reference only and do not affect the interpretation or meaning of any provisions of this Control Agreement.

     (h) This Control Agreement may be executed in as many counterparts as necessary or convenient, and by the different parties on separate counterparts each of which, when so executed, will be deemed an original but all such counterparts will constitute but one and the same agreement.

     (i) This Control Agreement and the schedules and exhibits hereto represent the sum of the understandings and agreements of the parties with respect to the subject matter hereof and supersede and discharge all prior agreements (written or oral) and negotiations and all contemporaneous oral agreements concerning such subject matter and negotiations. There are no oral conditions precedent to the effectiveness of this Control Agreement.

     (j) All terms not defined herein are used as set forth in the Uniform Commercial Code.

     (k) If any party to this Control Agreement is not a natural person, the person executing this Control Agreement on behalf of such party hereby represents that he or she has the proper authority to execute this Control Agreement on behalf of such party. Upon request of Secured Party, Securities Intermediary will provide evidence to Secured Party, in the form of a secretary’s certificate of incumbency or other certification satisfactory to Secured Party, of the due authority of the representatives of Securities Intermediary executing this Control Agreement.

     (l) Pledgor agrees to execute, endorse, acknowledge and deliver, or cause the same to be done, all such notices, certifications and additional agreements, undertakings, conveyances or other assurances as Secured Party may reasonably request in order to accomplish the purposes of this Control Agreement.

[Remainder of Page Intentionally Left Blank; Signatures Begin on Next Page]

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Secured Party:

BARCLAYS BANK PLC

By:	/s/ Philippe El-Asmar
	Name:	Philippe El-Asmar
	Title:	Managing Director

Address and facsimile number for notices to Secured Party:
5 The North Colonnade
Canary Wharf
London E14 4BB
Attention: Funds Bookrunning
Telephone Number: +44 (0) 20 777 38063
Facsimile Number: +44 (0) 20 751 67977
E-mail: funds.deriv@barclayscapital.com

Pledgor:

HIGHLAND MULTI-STRATEGY ONSHORE
MASTER SUBFUND, L.L.C.

By:	/s/ J. Kevin Ciavarra
	Name:	J. Kevin Ciavarra
	Title:	Assistant Secretary

Address and facsimile number for notices to Pledgor:
c/o Highland Capital Management, L.P.
13455 Noel Road, Suite 800
Dallas, Texas 75240
Attention: General Counsel
Telephone Number: (972) 628-4100
Facsimile Number: (972) 628-4147

Securities Intermediary:

BARCLAYS CAPITAL INC.

By:	/s/ Philippe El-Asmar
	Name:	Philippe El-Asmar
	Title:	Managing Director

Address and facsimile number for notices to Securities Intermediary:
c/o Equity Prime Services
200 Park Avenue
New York, NY 10166
Telephone Number: (212) 412-5116
Facsimile Number: (212) 412-6887

ANNEX 1

Reports:

The following reports to be sent on each business day, as of the close of business on the immediately preceding business day:

Positions Report (Trade Date)
Activity Report (Trade Date)
Cash Balance (Trade Date)
Account Equity Summary (Trade Date)

Secured Party e-mail addresses and Contacts for information and reports:

1.	fundprices@barcap.com
2.	funds.monitor@barcap.com
3.	simran.sethi@barcap.com

Contacts:

Simran Sethi / Rafik Abasov / Josephine Man / Paul Mawdsley
5 The North Colonnade
Canary Wharf
London, UK
E14 4BB

+44 207 773 6735