8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): December 18, 2006

Loral Space & Communications Inc.
__________________________________________
(Exact name of registrant as specified in its charter)

Delaware	1-14180	87-0748324
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
600 Third Avenue, New York, New York		10016
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: (212) 697-1105

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01 Other Events.

On December 18, 2006, Loral Space & Communications Inc. ("Loral") issued the Press Release filed herewith as Exhibit 99.1.

The press release makes reference to the combined trailing 12 months Adjusted EBITDA for the period ending September 30, 2006 for Loral and Telesat Canada ("Telesat"). Loral and Telesat define Adjusted EBITDA differently. Loral believes that these measures of Adjusted EBITDA are substantially equivalent and does not believe that these definitional differences result in any material differences in actual reported Adjusted EBITDA for the period in question. The applicable definitions, as set forth in the SEC filings of Loral and Telesat, are set forth below.

Telesat describes its use of Adjusted EBITDA in its SEC filings as follows:

"We define Adjusted EBITDA as EBITDA (which is net earnings before interest expense, income taxes and amortization) before other income (which includes non-operating income such as capitalized interest, foreign exchange gains (losses) a nd interest income). Adjusted EBITDA is used by management as a performance measure for benchmarking against our peers and our competitors. Additionally, Adjusted EBITDA is also one of the metrics used by management and our board of directors, as the case may be, to review the financial performance of the business on a monthly basis and to determine the level of variable compensation for management and employees. We believe Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry. Adjusted EBITDA is not recognized under Canadian or U.S. GAAP. Adjusted EBITDA should not be viewed in isolation and does not purport to be an alternative to net earnings as an indicator of operating performance. There are material limitations associated with making the adjustments to calculate Adjusted EBITDA and using this non-GAAP financial measure as compared to the most directly comparable GAAP financial measure. Fo r instance, EBITDA does not include:

• interest expense, and because we have borrowed money to finance our operations, interest expense is a necessary element of our costs and ability to generate revenue;

• amortization expense, and because we use capital assets, amortization expense is a necessary element of our costs and ability to generate revenue; and

• income tax expense, and because the payment of income taxes is part of our operations, income tax expense is a necessary element of our costs and ability to operate.

"Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as capital expenditures, contractual commitments, interest payments, income tax payments and debt service requirements. Because not all companies use identical calculations, this presentation of Adjusted EBITDA may not be comparable to other similarly t itled measures of other companies."

Based on Telesat's SEC's reports, Telesat’s Adjusted EBITDA for the 12 months ending September 30, 2006 was CAD 265 million.

Loral describes its use of Adjusted EBITDA in its SEC filings as follows:

"The common definition of EBITDA is 'Earnings Before Interest, Taxes, Depreciation and Amortization'. In evaluating financial performance, we use revenues and operating income (loss) before depreciation and amortization, including amortization of stock based compensation, and reorganization expenses due to bankruptcy ('Adjusted EBITDA') as the measure of a segment’s profit or loss. Adjusted EBITDA is equivalent to the common definition of EBITDA before: reorganization expenses due to bankruptcy; gain on discharge of pre-petition obligations and fresh-start adjustments; gain (loss) on investments; other income (expense); equity in net income (losses) of affiliates; and minority interest, net of tax.

"Adjusted EBITDA allows investors to compare our operating results with that of competitors exclusive of depreciation and amortization, interest and investment income, interest expense, reorganization expenses due to bankruptcy, net losses of affiliates and minority interest. Financial results of competitors in our industry have significant variations that can result from timing of capital expenditures, the amount of intangible assets recorded, the differences in assets’ lives, the timing and amount of investments, and effects of investments not directly managed. The use of adjusted EBITDA allows investors to compare operating results exclusive of these items. Competitors in our industry have significantly different capital structures. The use of Adjusted EBITDA maintains comparability of performance by excluding interest expense. In addition, during Chapter 11, we only recognized interest expense on the actual interest payments we made. During this period, we did not make any further interest payments on our debt obligations after Marc h 17, 2004, the date we repaid our secured bank debt. Reorganization expenses due to bankruptcy were only incurred during the period we were in Chapter 11. These expenses have been excluded from Adjusted EBITDA to maintain comparability with our results during periods we were not in Chapter 11 and with the results of competitors using similar measures.

"We believe the use of Adjusted EBITDA along with U.S. GAAP financial measures enhances the understanding of our operating results and is useful to investors in comparing performance with competitors, estimating enterprise value and making investment decisions. Adjusted EBITDA as used here may not be comparable to similarly titled measures reported by competitors. We also use Adjusted EBITDA to evaluate operating performance of our segments, to allocate resources and capital to such segments, to measure performance for incentive compensation programs, and to evaluate future growth opportunities. Adjusted EBITDA should be used in conjunction with U.S. G AAP financial measures and is not presented as an alternative to cash flow from operations as a measure of our liquidity or as an alternative to net income as an indicator of our operating performance."

As reported in Loral's SEC filings, the Adjusted EBITDA for Loral Skynet for the 12 months ending September 30, 2006 was US $66 million.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Loral Space & Communications Inc.
December 18, 2006	By:	Avi Katz
		Name: Avi Katz
		Title: Vice President and General Counsel

Exhibit Index

Exhibit No.	Description
99.1	Press Release dated December 18, 2006

EX-99.1

Contacts:
John McCarthy
Loral Space & Communications
(212) 338-5345

Anne Marie Laurendeau
PSP Investments
(514) 937 2772

LORAL AND PSP INVESTMENTS AGREE
TO ACQUIRE TELESAT CANADA

Loral Skynet and Telesat Will Combine To Create Premier
Global FSS Provider With US $4.9 Billion of Backlog

Total Value of Telesat Acquisition is US $2.96 Billion, Including Assumed Debt

NEW YORK and MONTREAL – December 18, 2006 – Loral Space & Communications Inc. (NASDAQ: LORL) today announced that it and its Canadian partner, the Public Sector Pension Investment Board (PSP Investments), have entered into a definitive agreement with BCE Inc. (TSX/NYSE: BCE) pursuant to which a joint venture company formed by PSP Investments and Loral will acquire 100 percent of the stock of Telesat Canada from BCE for approximately US $2.8 billion (CAD 3.25 billion), plus the assumption of US $148 million (CAD 172 million) of debt.

In connection with this transaction, Loral will transfer the fixed satellite services and network services assets of Loral Skynet to a new Canadian company, to be known as Telesat, based in Ottawa formed by Loral and PSP Investments. This new company will be one of the world’s largest operators of telecommunications satellites, with a combined fleet of eleven satellites and four additional satellites to be launched over the next three years. The new company will have combined trailing 12 months revenue for the period ended September 30, 2006 of approximately US $568 million (CAD 658 million) and US $4.9 billion (CAD 5.6 billion) of backlog, generating combined trailing 12 months Adjusted EBITDA for the period ended September 30, 2006 of approximately US $295 million (CAD 341 million).

The new company will feature a management team to be drawn from both Telesat and Loral Skynet and Daniel Goldberg will continue to serve as chief executive officer. Loral and PSP Investments will hold a 64 percent and 36 percent economic interest, respectively, in the new company. Consistent with Canadian law, Loral’s total voting equity will be 33.3 percent, with PSP Investments and other Canadian investors having 66.7 percent.

The combined Telesat-Loral Skynet company will offer its customers expanded satellite and terrestrial coverage, enhanced back-up advantages and an unparalleled level of customer service. Loral’s satellite fleet provides an array of video and data services primarily outside of North America, and complements Telesat’s North American fleet, which hosts strong video and data distribution services across North America, as well as Canada’s two premier direct-to-home video services.

The boards of directors of PSP Investments, Loral and BCE have each approved the transaction, which is subject to customary closing conditions, including approvals of the relevant Canadian and U.S. government authorities. The transaction is expected to close by mid-2007.

Michael B. Targoff, chief executive officer of Loral, said, “This transaction converts Loral’s ownership of its current FSS business into a 64 percent economic interest in a premier global provider of satellite services with a large, high-quality backlog, international scope and access to high growth markets. Loral looks forward to an exciting partnership with PSP Investments and wants to thank MHR Fund Management LLC, Loral’s largest shareholder, for its substantial assistance in bringing about this transaction.”

PSP Investments’ president and CEO Gordon J. Fyfe stated, “Telesat’s strong customer base and secure backlog are attractive for PSP Investments to acquire and hold, as they complement well PSP Investments’ long-term investment time horizon and unique liquidity. We have the resources for such transactions and are very pleased to be in a position to acquire this business with our partner Loral. PSP Investments also sees this joint venture as an attractive opportunity to further build Canadian technological presence in this industry and export it worldwide. We are extremely pleased to work with Loral and MHR and are enthusiastic about the expertise they bring.”

Mark H. Rachesky, MD, non-executive chairman of Loral and president of MHR, said, “We would like to express our appreciation to the entire Loral and PSP Investment teams for their hard work in effectuating this transaction. We believe this transaction will be very beneficial to Loral shareholders and MHR looks forward to continuing to build shareholder value at Loral.”

Loral and PSP Investments have received debt financing commitments for US $2.8 billion (CAD 3.2 billion) from a group of financial institutions led by Morgan Stanley and UBS. In addition, Loral and PSP Investments will provide the new Canadian holding company with cash equity. Based on the exchange rates used by Loral and PSP Investments in submitting their final proposal (US $1 equal to CAD 1.139), the amount contributed by Loral would be US $238 million (CAD 271 million) and the amount contributed by PSP Investments would be US $523 million (CAD 596 million), for a total of US $761 million (CAD 867 million).⁽¹⁾ The proceeds from the debt financing and cash equity at closing will be used by the new Canadian holding company to fund the purchase of Telesat stock and certain Telesat liabilities, plus fees and expenses; in addition, with these proceeds, Loral Skynet intends to retire its outstanding 14 percent senior secured notes and 12 percent Series A non-convertible preferred stock. Upon closing, the new company will have access to US $300 million (CAD 347 million) from two lines of credit in order to fund capital expenditures and provide additional liquidity.

Morgan Stanley & Co. and UBS Securities acted as financial advisors to Loral Space & Communications. Additionally, Evercore Partners acted as financial advisor to PSP Investments in connection with the transaction.

US$ to CAD conversions are based on the exchange rate at close of business on Friday, December 15th (US $1 equals CAD 1.157).

Conference Call
On Monday, December 18, Loral will hold a conference call and simultaneous webcast, to be hosted by Loral’s chief executive officer Michael B. Targoff, to discuss the transaction with investors.

The call will begin at 11:00 am EST on December 18. Participants should dial 913-981-4903 approximately 10 minutes before the call’s start. Access to the webcast will be available on Loral’s web site at www.loral.com.

A replay of the conference call will be available beginning at approximately 2:00 pm EST on December 18 by dialing 719-457-0820, passcode 7757584. The telephone replay will be available for one week. An archive of the webcast may be accessed on Loral’s web site for 30 days, beginning approximately one hour after the call ends.

About Telesat Canada
Headquartered in Ottawa, Telesat Canada is one of the early pioneers in satellite communications and systems management. Created in 1969, Telesat made history with the launch of Anik A1 in 1972 - the world’s first domestic communications satellite in geostationary orbit, operated by a commercial company. Telesat operates a fleet of satellites for the provision of broadcast distribution and telecommunications services, and is a highly respected consultant and partner in satellite ventures around the world. Telesat has offices throughout Canada, in the United States and in Brazil.

About PSP Investments
The Public Sector Pension Investment Board is a Canadian crown corporation established by Parliament by the Public Sector Pension Investment Board Act (September 1999). The mandate of PSP Investments is to manage employer and employee contributions made after April 1, 2000 to the federal Public Service, the Canadian Forces and the Royal Canadian Mounted Police pension funds. PSP has approximately CAD $30 billion under management. The head office of PSP Investments is located In Ottawa. Its principal business office is Montreal.

About Loral and Loral Skynet
A pioneer in the satellite industry, Loral Skynet delivers the superior service quality and range of satellite and global network service solutions that have made it an industry leader for more than 40 years. Through the broad coverage of the Telstar satellite fleet, in combination with its global fiber network infrastructure, Loral Skynet meets the needs of companies around the world for broadcast and data network services, Internet access, IP and systems integration.

In addition to its Loral Skynet satellite services subsidiary, Loral is a world-class leader in the design and manufacture of satellites and satellite systems for commercial and government applications through its Space Systems/Loral subsidiary.

About MHR Fund Management LLC
MHR Fund Management LLC is the investment manager of private investment funds with approximately $4 billion in assets, focusing on inefficient markets. MHR seeks to build shareholder value in its portfolio companies, often taking board seats and working closely with management.

# # #

⁽¹⁾ Based on the exchange rate as of Friday, December 15, 2006, US $1 equals CAD 1.157, Loral and PSP Investments would provide the new Canadian holding company with cash equity in the amount of US $720 million (CAD 833 million) consisting of approximately US $211 million (CAD 244 million) from Loral and US $509 million (CAD 589 million) from PSP.

Note: Telesat and Loral Skynet define Adjusted EBITDA differently.  The applicable definitions are set forth in their respective SEC filings. Loral believes that these measures of EBITDA are substantially equivalent, and does not believe that these definitional differences result in any material differences in actual reported Adjusted EBITDA for the period in question.

Telesat’s definition of Adjusted EBITDA is contained in its Form F-1, filed on September 18, 2006, as most recently amended on December 1, 2006. Loral’s definition of Adjusted EBITDA is contained in our Quarterly Report on Form 10-Q for the period ended September 30, 2006.

As used in this press release, backlog or contractual backlog means expected future revenue (without discounting to present value) under contractual service agreements, including deferred revenue that we will recognize in the future in respect of cash already received. The significant majority of this contractual backlog is in respect of service or other agreements for transponder satellite capacity. These agreements may extend to the end of the life of the satellite.
Contractual backlog is attributable to both satellites currently in orbit and to those planned for future launch.

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, Loral Space & Communications Inc. or its representatives have made or may make forward-looking statements, orally or in writing, which may be included in, but are not limited to, various filings made from time to time with the Securities and Exchange Commission, press releases or oral statements made with the approval of an authorized executive officer of the company. Actual results could differ materially from those projected or suggested in any forward-looking statements as a result of a wide variety of factors and conditions. Many of these factors and conditions are also described in the section of the annual report on Form 10-K for the fiscal year ended December 31, 2004 of Loral Space & Communications Ltd. (the predecessor registrant to the company) (“Ltd.”), entitled “Commitments and Contingencies,” and the company’s and Ltd.’s other filings with the Securities and Exchange Commission. The reader is specifically referred to these documents.