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 and Co. and UBS Securities acted as financial advisors to Loral Space and 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).

(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.

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