Loral Space and Communications has released an update with respect to its agreement to sell $300 million of convertible perpetual preferred stock to affiliates of MHR Fund Management LLC ("MHR"), Loral's largest shareholder.
Following shareholder expressions of interest and concerns after the agreement was announced on October 17, 2006, the Company and MHR considered adjustments and other alternatives to the agreed upon transaction that would have included a component for broader shareholder participation, while simultaneously seeking the regulatory approvals required under the agreement.
Among the approvals needed is a requirement that NASDAQ confirm that shareholder approval is not required under the NASDAQ Marketplace Rules.
Loral and MHR were advised today by NASDAQ that the transaction will not require shareholder approval, provided certain terms are amended to comply with NASDAQ rules.
NASDAQ has also indicated that adjustments or alternatives other than to effect compliance with its rules would effectively require the parties to agree to rescind and renegotiate the transaction, which is not an available alternative.
Accordingly, the Company and MHR are preparing modifications to the terms of the transaction that will satisfy NASDAQ requirements.
As a result of these modifications, in the event of a change of control in which a "make-whole" payment is triggered and holders elect to convert their shares of preferred stock to common stock, holders will now receive under all circumstances non-voting stock as a "make-whole" payment.
The non-voting stock received in respect of the "make-whole" payment will not be exchangeable into voting stock absent a shareholder vote specifically approving such exchange.
