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SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

For the quarterly period ended March 31, 2004

Commission file number 1-14180

Loral Space & Communications Ltd.

c/o Loral SpaceCom Corporation

Jurisdiction of incorporation: Bermuda

IRS identification number: 13-3867424

      The registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days.

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes þ          No o

      As of April 30, 2004, there were 44,125,202 shares of Loral Space & Communications Ltd. common stock outstanding.

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PART 1.

LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN POSSESSION

CONDENSED CONSOLIDATED BALANCE SHEETS

See notes to condensed consolidated financial statements.

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LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN POSSESSION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

See notes to condensed consolidated financial statements.

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LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN POSSESSION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See notes to condensed consolidated financial statements.

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LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN POSSESSION

      Loral Space & Communications Ltd. (“Loral” or the “Company”, which terms shall include its subsidiaries unless otherwise indicated or the context requires) together with its subsidiaries is a leading satellite communications company with substantial activities in satellite-based communications services and satellite manufacturing. Loral is organized into two operating segments (see Note 17):

	Satellite Services. Satellite services, managed by Loral Skynet, a division of Loral, generates its revenues and cash from leasing satellite capacity and platforms to customers for video and direct to home (“DTH”) broadcasting, high-speed data distribution, Internet access, communications and networking services.
	Satellite Manufacturing. Satellite manufacturing, conducted by Loral’s subsidiary Space Systems/ Loral (“SS/L”), generates its revenues and cash from designing and manufacturing satellites, space systems and space system components for commercial and government applications including satellite services, DTH broadcasting, broadband data distribution, wireless telephony, digital radio, military communications, weather monitoring and air traffic management.

      On July 15, 2003, Loral and certain of its subsidiaries (the “Debtor Subsidiaries” and collectively with Loral, the “Debtors”), including Loral Space & Communications Corporation, Loral SpaceCom Corporation (“Loral SpaceCom”), Loral Satellite, Inc. (“Loral Satellite”), SS/ L and Loral Orion, Inc. (“Loral Orion”), filed voluntary petitions for reorganization under chapter 11 of title 11 (“Chapter 11”) of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) (Lead Case No. 03-41710 (RDD), Case Nos. 03-41709 (RDD) through 03-41728 (RDD)) (the “Chapter 11 Cases”). Loral and its Debtor Subsidiaries continue to manage their properties and operate their businesses as “debtors in possession” under the jurisdiction of the Bankruptcy Court and in accordance with the provisions of the Bankruptcy Code (see Note 3).

      Also on July 15, 2003, Loral and one of its Bermuda subsidiaries (the “Bermuda Group”) filed parallel insolvency proceedings in the Supreme Court of Bermuda (the “Bermuda Court”). On that date, the Bermuda Court entered an order appointing Philip Wallace, Chris Laverty and Michael Morrison, partners of KPMG, as Joint Provisional Liquidators (“JPLs”) in respect of the Bermuda Group. The Bermuda Court granted the JPLs the power to oversee the continuation and reorganization of these companies’ businesses under the control of their boards of directors and under the supervision of the U.S. Bankruptcy Court and the Bermuda Court. The JPLs have not audited the contents of this report.

      As a result of Loral’s and the Debtor Subsidiaries’ voluntary petitions for reorganization, all of Loral’s prepetition debt obligations (principal amounts aggregating approximately $1.049 billion at March 31, 2004) have been accelerated (see below and Notes 11 and 12). On July 15, 2003, Loral suspended interest payments on all of its senior unsecured notes, with an aggregate principal amount of $1.049 billion. A creditors’ committee has been appointed in the Chapter 11 Cases to represent all unsecured creditors, including all holders of Loral’s and Loral Orion’s senior unsecured notes, and, in accordance with the provisions of the Bankruptcy Code, has the right to be heard on all matters that come before the Bankruptcy Court (see Note 12).

      During the duration of the Chapter 11 Cases, Loral’s businesses are subject to risks and uncertainties of bankruptcy. For example, the Chapter 11 Cases could adversely affect Loral’s relationships with customers, suppliers and employees, which, in turn could adversely affect the going concern value of the business and of Loral’s assets, particularly if the Chapter 11 Cases are protracted. Also, transactions outside the ordinary course of business are subject to the prior approval of the Bankruptcy Court which may limit Loral’s ability to

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

respond to certain market events or take advantage of certain market opportunities, and, as a result, Loral’s operations could be materially adversely affected.

      As a result of the commencement of the Chapter 11 Cases, the pursuit of pending claims and litigation against Loral and its Debtor Subsidiaries arising prior to or relating to events which occurred prior to the commencement of the Chapter 11 Cases is generally subject to an automatic stay under Section 362 of the Bankruptcy Code. Accordingly, absent further order of the Bankruptcy Court, a party is generally prohibited from taking any action to recover any prepetition claims, enforce any lien against or obtain possession of any property from Loral or its Debtor Subsidiaries. In addition, pursuant to Section 365 of the Bankruptcy Code, Loral and its Debtor Subsidiaries may reject or assume prepetition executory contracts and unexpired leases, and parties affected by rejections of these contracts or leases may file claims with the Bankruptcy Court which will be addressed in the context of the Chapter 11 Cases.

      On July 15, 2003, the New York Stock Exchange suspended trading of Loral’s common stock and, on September 2, 2003, removed Loral’s securities from listing and registration. Loral’s common stock is being quoted under the ticker symbol LRLSQ on the Pink Sheets and on the Over-The-Counter Bulletin Board Service. The Company anticipates that, in any plan of reorganization ultimately confirmed by the Bankruptcy Court, the common and preferred stock of the Company likely will be eliminated entirely.

      On March 17, 2004, Loral Space & Communications Corporation, Loral SpaceCom Corporation and Loral Satellite, Inc. (collectively, the “Sellers”) consummated the sale (the “Sale”) of the Sellers’ North American fleet of satellites and related assets to certain affiliates of Intelsat, Ltd. and Intelsat (Bermuda), Ltd. (collectively, “Intelsat” or the “Purchasers”). At closing, the Company received approximately $1.011 billion, consisting of approximately $961 million for the North American satellites and related assets, after adjustments, and $50 million for an advance on a new satellite to be built for Intelsat by SS/ L. The Company’s obligations with respect to the $50 million advance are secured by the Telstar 14/Estrela do Sul-1 satellite and related assets, including insurance proceeds relating to the satellite. The Company used a significant portion of the funds received to repay all $967 million of its outstanding secured bank debt. In addition, after closing, the Sellers received from the Purchasers approximately $16 million to reimburse a deposit made by the Sellers for the launch of Telstar 8, and the Sellers expect to receive an additional $4 million as a purchase price adjustment resulting from resolution of a regulatory issue relating to the purchased assets. The Sale was completed after the Bankruptcy Court approved, on March 16, 2004, the final amendment to the asset purchase agreement, dated July 15, 2003, between the Sellers and the Purchasers.

      The North American satellites and related assets have been accounted for as a discontinued operation, resulting in the reclassification of the Company’s historical condensed consolidated statements of operations and statements of cash flows to reflect these operations as discontinued operations separately from continuing operations (see Note 4).

      Loral intends to reorganize around its satellite manufacturing operations and its remaining fleet of international satellites and does not believe it will require any additional financing to fund operations.

      As provided by the Bankruptcy Code, the Debtors had the exclusive right to submit their plan or plans of reorganization for 120 days from the date of the Chapter 11 filing. The Bankruptcy Court has extended this exclusive period through July 12, 2004. If Loral and its Debtor Subsidiaries fail to file their plan or plans of reorganization during this exclusive period, or if a plan is filed and such plan or plans is not accepted by the required number of creditors and equity holders within the required period, any party in interest may subsequently file its own plan or plans of reorganization for Loral and its Debtor Subsidiaries. A plan of

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

reorganization must be confirmed by the Bankruptcy Court upon certain findings being made by the Bankruptcy Court which are required by the Bankruptcy Code. The Bankruptcy Court may confirm a plan of reorganization notwithstanding rejection of the plan by an impaired class of creditors or equity holders if certain requirements of the Bankruptcy Code are met. Although Loral and its Debtor Subsidiaries expect to file a plan or plans of reorganization that provide for emergence from bankruptcy sometime in 2004, Loral cannot now describe the components or features of the plan, including whether the plan will provide for creditors to be paid in whole or in part or whether consideration they will receive will consist of cash, debt, equity or some combination thereof. In addition, there can be no assurance that Loral will be able to propose a plan, obtain court approval of any plan it proposes, obtain acceptances from the number of creditors necessary to confirm a plan, or actually confirm and consummate a plan.

      The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company, in its current structure, will continue as a going concern. However, the factors mentioned in Note 2 above, among other things, raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The ability of the Company to continue as a going concern is dependent on a number of factors including, but not limited to, the Company developing a plan of reorganization, confirmation of the plan by the Bankruptcy Court and Loral maintaining good relations with its customers, suppliers and employees. If a plan of reorganization is not confirmed and implemented, the Company may be forced to liquidate under applicable provisions of the Bankruptcy Code. There can be no assurance of the level of recovery that the Company’s creditors would receive in such liquidation. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities if the Company were forced to liquidate (see Reorganization in Note 2).

      The condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) and, in the opinion of the Company, include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of results of operations, financial position and cash flows as of and for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted pursuant to SEC rules. The Company believes that the disclosures made are adequate to keep the information presented from being misleading. The results of operations for the three months ended March 31, 2004 are not necessarily indicative of the results to be expected for the full year. The December 31, 2003 balance sheet has been derived from the audited consolidated financial statements at that date. It is suggested that these condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements included in the Company’s latest Annual Report on Form 10-K.

      The condensed consolidated financial statements have been prepared in accordance with Statement of Position No. 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code (“SOP 90-7”). SOP 90-7 requires an entity to distinguish prepetition liabilities subject to compromise from postpetition liabilities in the Company’s condensed consolidated balance sheet. The caption “liabilities subject to compromise” reflects the carrying value of prepetition claims that will be restructured in Loral’s and its Debtor Subsidiaries’ Chapter 11 Cases. In addition, the Company’s condensed consolidated statement of operations portrays the results of operations of the reporting entity during Chapter 11 proceedings. As a result, any revenue, expenses, realized gains and losses, and provision for losses resulting directly from the reorganization and restructuring of the organization are reported separately as reorganization items, except those required to be reported as discontinued operations and extraordinary items in conformity with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”) and

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections (“SFAS 145”). The Company did not prepare condensed combined financial statements for Loral and the Debtor Subsidiaries, since the subsidiaries that did not file voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code were immaterial to the Company’s condensed consolidated financial position and results of operations.

      During 2004 and 2003, Loral continued to maintain the 100% valuation allowance established at December 31, 2002 and recorded no benefit for its domestic loss. In 2004, the Company recorded a provision for continuing operations relating to foreign income taxes with no benefit for the loss from discontinued operations. In 2003, the Company recorded a benefit in continuing operations primarily for the provision reclassified to income from discontinued operations offset by a deferred tax liability for certain foreign entities.

      The following table provides the components of net periodic benefit cost for the Company’s qualified and supplemental retirement plans (the “Pension Benefits”) and health care and life insurance benefits for retired employees and dependents (the “Other Benefits”) for the three months ended March 31, 2004 and 2003 respectively (in thousands):

      The following represents non-cash activities and supplemental information to the condensed consolidated statements of cash flows (in thousands):

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Certain reclassifications have been made to conform prior year amounts to the current year’s presentation.

      As described in Note 2, on March 17, 2004, the Company completed the sale of its North American satellites and related assets to Intelsat. The operating revenues and expenses of the North American satellites and related assets have been classified as discontinued operations under SFAS No. 144 for all periods presented. Due to certain unsettled contingencies, Loral has deferred the expected gain of approximately $21 million on the sale on its condensed consolidated balance sheet as of March 31, 2004. The determination of the actual gain on the sale will be finalized based on the resolution of certain contingencies. Accordingly, the actual gain that will ultimately be recognized may be different than the deferred gain reflected herein.

      The following table summarizes certain statement of operations data for the discontinued operations. In 2004, the results of the discontinued operations are for the period from January 1, 2004 to March 17, 2004, the date of the sale and include the write-off of approximately $11 million of debt issue costs to interest expense relating to the Company’s secured debt that was repaid. For the purposes of this presentation, all indirect costs normally associated with these operations have been included in continuing operations. These indirect costs include telemetry, tracking and control, access control, maintenance and engineering, selling and marketing, and general and administrative.

      The net book value of the satellites to be sold was $935 million (including insurance proceeds receivable on the Company’s consolidated balance sheet at December 31, 2003) and of the related assets and liabilities was $30 million and $31 million, respectively, as of December 31, 2003.

      In accordance with SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure (“SFAS 148”), an amendment of SFAS 123, presented below are the pro forma results as if the Company applied the fair value-based method of accounting for stock-based employee compensation. Under SFAS 123, the fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company’s stock option awards. These models also require subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The Company’s calculations were made using the Black-Scholes option pricing model with the following weighted average assumptions: expected life, six to twelve months following vesting; stock volatility, 90%; risk free interest rate, 2.4% to 6.6% based on date of grant; and no dividends during the expected term. The Company’s calculations are based on a multiple option

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

valuation approach and forfeitures are recognized as they occur. The following table summarizes what the Company’s pro forma net loss and pro forma loss per share would have been if the fair value method under SFAS 123 was used (in millions, except per share amounts):

      The components of comprehensive loss are as follows (in thousands):

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Unbilled amounts include recoverable costs and accrued profit on progress completed, which have not been billed. Such amounts are billed in accordance with the contract terms, typically upon shipment of the product, achievement of contractual milestones, or completion of the contract and, at such time, are reclassified to billed receivables.

      The Company has estimated that it will incur approximately $52 million to repair a satellite that was damaged in transit. The Company expects to recover a significant portion of these costs through insurance coverage. Management believes that the resolution of the insurance claim will not have a material adverse effect on its condensed consolidated financial position or its results of operation.

      Upon filing Chapter 11, SS/L’s hedges with counterparties (primarily yen-denominated forward contracts) were cancelled leaving SS/L vulnerable to foreign currency fluctuations in the future. The inability to enter into forward contracts exposes SS/L’s future revenues, costs and cash associated with anticipated yen denominated receipts and payments to currency fluctuations. As of March 31, 2004, SS/L had the following amounts denominated in Japanese yen that were unhedged (in millions):

      At March 31, 2004, SS/ L also had future expenditures in euros of 1.8 million ($2.2 million U.S.) that were unhedged.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      On March 17, 2004 the Company sold its North American satellites and related assets (see Note 2).

      In January 2004, the Company’s Telstar 14/ Estrela do Sul-1 satellite only partially deployed its North solar array after launch. At the end of March 2004, the satellite began commercial service with the capability to operate between 10 and 14 transponders of the 41 transponders on the satellite. The life of the satellite is now expected to be approximately six years (design life 15 years). During March 2004, the Company recorded an impairment charge of $12 million to reduce the carrying value of the satellite and related assets to the expected proceeds from insurance. The carrying value of Telstar 14/ Estrela do Sul-1 and related assets at March 31, 2004 was $250 million, which is substantially included in satellites in-orbit. It is insured for partial and total losses up to a maximum of $250 million.

      Investments in and advances to affiliates consist of (in thousands):

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Equity in net (losses) income of affiliates, consists of (in thousands):

      The condensed consolidated statements of operations reflect the effects of the following amounts related to transactions with or investments in affiliates (in thousands):

      XTAR, a joint venture between Loral and Hisdesat Servicios Estrategicos, S.A. (“Hisdesat”), a consortium comprised of leading Spanish telecommunications companies, including Hispasat, S.A., and agencies of the Spanish government, is constructing and plans to launch an X-band satellite to provide X-band services to government users in the United States and Spain, as well as other friendly and allied nations. XTAR is owned 56% by Loral (accounted for under the equity method since the Company does not control certain significant operating decisions) and 44% by Hisdesat. In addition, XTAR has agreed to lease certain transponders on the Spainsat satellite, which is being constructed by SS/L for Hisdesat. As of March 31, 2004, the partners in proportion to their respective ownership interests have contributed $95 million to XTAR.

      In October 2003, Loral and Hisdesat entered into an agreement (the “Contribution Agreement”) to contribute over time an additional $25.4 million and $20.0 million, respectively, into XTAR, with Loral’s contribution effected through the cancellation of amounts owed under XTAR’s satellite construction contract with SS/L. The proceeds from Hisdesat’s capital contributions have been and will be used largely to fund the remaining amounts due under the satellite construction contract. XTAR has entered into a Launch Services Agreement with Arianespace, S.A. providing for launch of its satellite on Arianespace’s Ariane 5 ECA launch vehicle. This flight represents the resumption of the Ariane 5 ECA’s missions since the unsuccessful launch in late 2002. Arianespace has agreed to provide a one-year loan for a portion of the launch price, secured by certain of XTAR’s assets, including the satellite, ground equipment and rights to the orbital slot. The remainder of the launch price consists of a revenue-based fee to be paid over time following commencement of operations by XTAR. XTAR still requires additional funds to insure its satellite, complete the ground station system and fund its operations. XTAR is in discussions with its shareholders to obtain additional contributions and is seeking additional funds through other third-party financings.

      In March 2004, after receiving Bankruptcy Court approval, Loral funded an additional $2.8 million to XTAR, which was matched by $2.2 million of contributions to XTAR from Hisdesat. If XTAR is unable to

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

raise the substantial additional funds for launch insurance, the Company’s investment in XTAR of $48 million at March 31, 2004, and any additional investment effected as a result of the Contribution Agreement or otherwise, could be adversely affected. Moreover, if XTAR is unable to repay the Arianespace loan when due, Arianespace will have the right to foreclose on the XTAR assets pledged as collateral, which will also adversely affect the Company’s investment in XTAR.

      On April 14, 2004, Globalstar announced the completion of its financial restructuring following the formal acquisition of its main business operations and assets by Thermo Capital Partners LLC (“Thermo”), effectively resulting in Globalstar exiting from bankruptcy. Thermo invested $43 million in the newly formed Globalstar company (“New Globalstar”) in exchange for an 81.25% equity interest, with the remaining 18.75% of the equity to be distributed to the creditors of Globalstar, L.P. (“Globalstar”). Loral’s share of such equity interest allocation is estimated to be approximately 2.5% of New Globalstar.

      During the pendency of the Globalstar bankruptcy cases, Loral entered into a settlement and release agreement with Globalstar and Globalstar’s official creditors committee to resolve certain issues related to Globalstar and Globalstar’s restructuring (the “Settlement”). This Settlement was approved on April 14, 2003 by the bankruptcy court overseeing Globalstar’s case and closed on July 10, 2003. Among other things, the Settlement provided that Globalstar grants to Loral, subject to certain conditions, a general release of all claims Globalstar may have against Loral in exchange for certain consideration including, effective upon Globalstar’s emergence from Chapter 11 reorganization, an approximate 50% reduction in the amount of Loral’s unsecured claims against Globalstar of approximately $875 million. Loral does not expect any material impact on its results of operations or financial position as a result of this Settlement.

      On April 24, 2003, one of Globalstar’s creditors filed a motion seeking reconsideration by Globalstar’s bankruptcy court of its approval of the Settlement. Globalstar’s bankruptcy court denied this motion for reconsideration on May 30, 2003, and, on June 9, 2003, the creditor filed a notice of appeal of the bankruptcy court’s order approving the Settlement. Although the Company believes that the appeal, which is currently pending, is without merit, no assurance can be given in this regard or as to what relief, if any, might be granted in the event the appeal were to be successful.

      Other acquired intangible assets are included in other assets in the Company’s consolidated balance sheets as follows (in millions):

      As of March 31, 2004, the weighted average remaining amortization period for regulatory fees was approximately 11 years and approximately one year for other intangibles.

      Total pre-tax amortization expense for other acquired intangible assets was $0.8 million and $0.9 million for the three months in the period ended March 31, 2004 and 2003, respectively. Annual pre-tax amortization

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expense for other acquired intangible assets for the five years ended December 31, 2008 is estimated to be as follows (in millions):

      As discussed in Note 2, Loral and its Debtor Subsidiaries have been operating as a debtor in possession under the jurisdiction of the Bankruptcy Court and in accordance with the provisions of the Bankruptcy Code.

      In the condensed consolidated balance sheet, the caption “liabilities subject to compromise” reflects Loral’s carrying value of prepetition claims that will be restructured in Loral’s and its Debtor Subsidiaries’ Chapter 11 Cases. Pursuant to court order, Loral has been authorized to pay certain prepetition operating liabilities incurred in the ordinary course of business (e.g. salaries and insurance). Since July 15, 2003, as permitted under the Bankruptcy Code, the Company has rejected certain of its prepetition obligations. Loral is in the process of calculating its estimated liability to the unsecured creditors affected by these contract rejections. The Bankruptcy Court established January 26, 2004 as the bar date in the Debtors’ Chapter 11 Cases, which is the date by which prepetition claims against Loral and its Debtor Subsidiaries were required to have been filed for claimants to receive any distribution in the Chapter 11 Cases. Differences between liability amounts estimated by the Company and claims filed by creditors are being investigated and the Bankruptcy Court will make a final determination of the allowable claim. The determination of how liabilities will ultimately be treated cannot be made until the Bankruptcy Court approves a Chapter 11 plan of reorganization. Loral and its Debtor Subsidiaries will continue to evaluate the amount and classification of their prepetition liabilities through the remainder of their Chapter 11 Cases. Should Loral or its Debtor Subsidiaries, through this ongoing evaluation, identify additional liabilities subject to compromise, such amounts will be recognized accordingly. As a result, “liabilities subject to compromise” are subject to change. Claims classified as “liabilities subject to compromise” represent secured as well as unsecured claims. Liabilities subject to compromise at March 31, 2004 and December 31, 2003 consisted of the following (in thousands):

(1)	Includes approximately $47 million of vendor financing that is non-recourse to SS/L in the event of non-payment by Globalstar due to bankruptcy. The Company expects to record $47 million of equity income relating to Globalstar in 2004 on the reversal of such non-recourse vendor financing obligations, upon the liquidation of Globalstar.

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      In August 2002, Loral’s Board of Directors approved a plan to suspend indefinitely the future payment of dividends on its two series of preferred stock. Accordingly, Loral has deferred the payments of quarterly dividends due on its Series C preferred stock commencing on November 1, 2002 and the payments of quarterly dividends due on its Series D preferred stock commencing on November 15, 2002. On July 15, 2003, as a result of the Company’s Chapter 11 filing, Loral stopped accruing dividends on the two series of its preferred stock in its condensed consolidated financial statements. Because Loral failed to pay dividends on the Series C and the Series D preferred stock for six consecutive quarters, holders of the majority of each class of such preferred stock are now entitled, subject to the applicable effects of the Chapter 11 Cases and Loral’s Bermuda insolvency proceedings, to elect two additional directors, for a total of four directors, to Loral’s Board of Directors.