Exclusive: Telesat owner Loral explores sale-sources

NEW YORK Wed Jan 22, 2014 4:37pm EST

NEW YORK (Reuters) - Loral Space & Communications Inc, which holds a majority stake in Canadian satellite communication services company Telesat Holdings Inc, is exploring a sale, according to several people familiar with the matter.

Loral, whose biggest shareholder is hedge fund veteran Mark Rachesky's MHR Fund Management LLC, is working with Credit Suisse Group AG as it prepares to market itself to potential buyers, the people said.

At the same time, Loral is talking to another Telesat shareholder, Canada's Public Sector Pension Investment Board (PSP), about the possibility of jointly selling Telesat, one of the people said. There is no agreement currently between Loral and PSP about a joint sale of Telesat, the people said.

A buyer seeking control of Telesat would need PSP's agreement. The Canadian pension fund manager is being advised by Morgan Stanley on options for its stake in Telesat, the person added.

All the sources asked not to be identified because the deliberations are confidential. Loral, Credit Suisse and Morgan Stanley declined to comment while representatives of PSP, Telesat and MHR did not respond to requests for comment.

Loral shares rose as much as 8 percent on the news and ended trading on Wednesday up 2.9 percent at $78.04, giving it a market value of $2.35 billion.

Loral draws the bulk of its value from Telesat, holding a 62.8 percent economic interest but only 33.3 percent of its voting stock. PSP has a 35.3 percent economic interest and 66.7 percent of the voting power, according to regulatory filings.

Loral and PSP jointly explored the sale of Telesat to other companies in the sector and private equity firms three years ago, seeking as much $7 billion, but could not agree on a price.

Headquartered in Ottawa, Ontario, Telesat is the world's fourth largest provider of fixed satellite services, behind Intelsat Global SA, SES SA and Eutelsat Communications SA, according to the company's latest annual report.

Telesat provides satellite-based video and data services to broadcasters, companies and governments. Telesat's fleet of 14 satellites operates about 22,000 miles in orbit above the equator.

Telesat has a stable contract-based revenue stream, with a nearly six-year equivalent revenue backlog of $5 billion, Moody's Investors Service Inc said in November. In the 12 months to the end of September, Telesat reported consolidated earnings before interest, tax, depreciation and amortization of $709 million.

Loral and PSP acquired Telesat in 2007 for $3.42 billion from one of Canada's major phone companies, BCE Inc. In 2012, Loral sold its space systems subsidiary to MacDonald, Dettwiler and Associates Ltd , leaving Telesat as Loral's main asset.

Loral also owns a 56 percent stake in XTAR LLC, a commercial satellite operator which is a joint venture between Loral and Spanish satellite operator Hisdesat Servicios Estrategicos SA.

MHR held 38 percent of Loral's outstanding voting common stock as of September. Rachesky, who co-founded MHR in 1996 after working for activist investor Carl Icahn for six years, is seen as key to Loral accepting any takeover offer.

(Additional reporting by Nicola Leske in New York; Editing by Alden Bentley)

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