Loral’s financials coupled with capacity bankruptcy setbacks in the fixed satellite services business castdoubt on its business potential. This was confirmed during the failed acquistion attempt of capacity from New Skies Holdings. This begs the question: Why were MHR and Targoff in such a rush to close a finance deal that would provide MHR with literal control of the company? The answer is security in the satellite manufacturing business.

Satellite manufacturing contracts have a sales cycle that range from 6 to 18 months. Sales organizations manage projections based on pipelines, projected closing dates, and probability that they will win a contract. The following timeline of events pulled directly from press releases on Loral’s website.

• Nov 21, 2005 Loral emerges from bankruptcy while Targoff is working for them as a consultant but offices in MHR’s Manhattan offices.
• Feb 2, 2006 Targoff is announced as the CEO of Loral.
• Mar 1, 2006 Doron Lipshitz email Targoff information related to Revlon as it pertains to an equity deal with MHR.
• May 3, 2006 Loral is awarded a contract to build AsiaSat – 5
• Jun 8, 2006 Loral is awarded a contract to build Sirius FM5
• Jun 30, 2006 Loral is awarded a contract to build a satellite for Echostar. The press release quotes “One of four contracts awarded to date in 2006…”.
• Aug 15, 2006 Loral is awarded a contract to build Terrestar-2.
• Oct 17, 2006 Loral announces $300M equity deal with MHR.
• Jan 5, 2007 Loral is awarded a contract to build a satellite for Protostar.

In Loral’s March 15 press release entitled “Loral Reports 2006 Fourth Quarter and Full Year Results” the company reports a 27% increase in revenues led by strong results at SS/L, the company’s satellite manufacturing unit. The SS/L review, the company calls out the award of 7 new satellite manufacturing contracts and the delivery of 5 satellites from contracts awarded in previous years. The SkyNet recap, however, provides some lackluster results, mention of a service cancellation by Boeing, and some forward looking statements around the joint venture with Telesat Canada.

Anyone with a pulse on manufacturing delivery and sales pipeline could have predicted the strength in the satellite manufacturing business and its potential impact on the 2006 numbers. Would Targoff as an external consultant in 2005 have had that pulse? Based on this business unit’s results in a strong satellite manufacturing market, would a more proper campaign and/or market check for alternative financing have resulted in a deal more favorable than MHR? Did MHR know that by providing funding to shore up the fixed satellite services business that it would position itself to benefit from the upside of the satellite manufacturing business? Is this why Loral was so attractive? Is this why thee was such a rush to close a financing deal?