LORAL SPACE & COMMUNICATIONS LTD, 424B1, 1998-06-26

LORAL SPACE & COMMUNICATIONS LTD
424B1, 1998-06-26
RADIOTELEPHONE COMMUNICATIONS

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<PAGE> 1
As Filed Pursuant to Rule 424(b)(1)
Registration No. 333-51133

PROSPECTUS
20,000,000 Shares

[LORAL SPACE LOGO]
Common Stock
------------------------

All the common shares, par value $.01 per share (the "Common Stock"),
offered hereby are being offered by Loral Space & Communications Ltd., a Bermuda
company ("Loral" or the "Company"). Of the 20,000,000 shares of Common Stock
offered, 16,000,000 shares are being offered initially in the United States and
Canada in a United States offering (the "U.S. Offering") by the U.S.
Underwriters and 4,000,000 shares are being offered outside the United States
and Canada in a concurrent offering (the "International Offering") by the
International Managers (together with the U.S. Underwriters, the
"Underwriters"). These offerings are collectively referred to herein as the
"Offering."

The Common Stock is traded on the New York Stock Exchange ("NYSE") under
the symbol "LOR". On June 24, 1998, the last reported sale price of the Common
Stock was $26 7/8 per share. See "Price Range of Common Stock."

THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 9.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=======================================================================================================================
UNDERWRITING DISCOUNTS PROCEEDS TO THE
PRICE TO PUBLIC AND COMMISSIONS(1) COMPANY(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share...................... $27.00 $.80 $26.20
- -----------------------------------------------------------------------------------------------------------------------
Total(3)....................... $540,000,000 $16,000,000 $524,000,000
=======================================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $1,000,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an aggregate of 3,000,000 additional shares of Common Stock on the same
terms and conditions as set forth herein solely to cover over-allotments, if
any. If such option were exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be
$621,000,000, $18,400,000 and $602,600,000, respectively. See
"Underwriting."
------------------------

The shares of Common Stock offered by this Prospectus are offered by the
U.S. Underwriters subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
U.S. Underwriters and to certain further conditions. It is expected that
delivery of the shares of Common Stock will be made at the offices of Lehman
Brothers Inc., New York, New York, on or about June 30, 1998.
------------------------
LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

BANCAMERICA ROBERTSON STEPHENS CIBC OPPENHEIMER
NATIONSBANC MONTGOMERY SECURITIES LLC C.E. UNTERBERG, TOWBIN

June 24, 1998
<PAGE> 2

PROSPECTUS
20,000,000 Shares

[LORAL SPACE LOGO]
Common Stock
------------------------

All the common shares, par value $.01 per share (the "Common Stock"),
offered hereby are being offered by Loral Space & Communications Ltd., a Bermuda
company ("Loral" or the "Company"). Of the 20,000,000 shares of Common Stock
offered, 4,000,000 shares are being offered initially outside the United States
and Canada in an international offering (the "International Offering") by the
International Managers and 16,000,000 shares are being offered inside the United
States and Canada in a concurrent offering (the "U.S. Offering") by the U.S.
Underwriters (together with the International Managers, the "Underwriters").
These offerings are collectively referred to herein as the "Offering."

The Common Stock is traded on the New York Stock Exchange ("NYSE") under
the symbol "LOR". On June 24, 1998 the last reported sale price of the Common
Stock was $26 7/8 per share. See "Price Range of Common Stock."

THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 9.
------------------------

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $1,000,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an aggregate of 3,000,000 additional shares of Common Stock at the same
terms and conditions as set forth herein solely to cover over-allotments, if
any. If such option were exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be
$621,000,000, $18,400,000 and $602,600,000, respectively. See
"Underwriting."
------------------------

The shares of Common Stock offered by this Prospectus are offered by the
International Managers subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
International Managers and to certain further conditions. It is expected that
delivery of the shares of Common Stock will be made at the offices of Lehman
Brothers Inc., New York, New York, on or about June 30, 1998.
------------------------

LEHMAN BROTHERS
BEAR, STEARNS INTERNATIONAL LIMITED

DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL

BANCAMERICA ROBERTSON STEPHENS CIBC WOOD GUNDY OPPENHEIMER
NATIONSBANC MONTGOMERY SECURITIES LLC C.E. UNTERBERG, TOWBIN

June 24, 1998
<PAGE> 3

[GRAPHIC SHOWING: SATELLITE OVER THE EARTH FOLLOWED BY LORAL LOGO WITH TEXT
STATING "LEADING PROVIDER OF SATELLITE-BASED TECHNOLOGY AND MANUFACTURING,
SATELLITE-BASED TRANSMISSION NETWORKS AND VALUE-ADDED SERVICES"; ORBITAL SLOTS
HELD BY LORAL
AND ITS AFFILIATES; GLOBALSTAR CONSTELLATION; SERVICES, NETWORK,
AND HARDWARE AND TECHNOLOGY OF LORAL AND ITS AFFILIATES]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF COMMON STOCK FOLLOWING THE PRICING OF
THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK OR FOR THE
PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE IMPOSITION OF
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES RELATING TO THIS OFFERING,
SEE "UNDERWRITING."
<PAGE> 4

AVAILABLE INFORMATION

Loral, its subsidiary Loral Orion Network Systems, Inc. ("Orion"), and its
affiliates, Globalstar Telecommunications Limited ("GTL") and Globalstar, L.P.
("Globalstar"), are subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith file
reports, proxy statements or other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information may be inspected and copied at public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
Seven World Trade Center, 13th Floor, New York, New York 10048; and Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549 at prescribed rates. The Commission maintains a Web site
at http://www.sec.gov that contains reports, proxy and information statements
and other information regarding Loral, Orion, GTL and Globalstar. The Common
Stock is listed on the NYSE, and any reports, proxy and information statements
and other information filed under the Exchange Act may also be inspected and
copied at the offices of the New York Stock Exchange, 120 Broad Street, New
York, New York 10005.

Loral has filed with the Commission a Registration Statement on Form S-3
(together with all exhibits and amendments, the "Registration Statement") under
the Securities Act, with respect to the Common Stock. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain portions of which are omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to Loral and the Common Stock, reference is made to the
Registration Statement, including the exhibits and schedules. The Registration
Statement may be inspected, without charge, at the Commission's principal office
at 450 Fifth Street, NW, Washington, D.C. 20549, and also at the regional
offices of the Commission listed above. Copies of such material may also be
obtained from the Commission upon the payment of prescribed rates.

FORWARD-LOOKING STATEMENTS

The statements contained in this Prospectus that are not historical facts
are "forward looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act, which can be identified by
the use of forward-looking terminology such as "believes," "expects," "may,"
"will," "should," or "anticipates" or the negative thereof or other variations
thereon or comparable terminology, or by discussions of strategy that involve
risks and uncertainties. The Company's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. Potential risks and uncertainties that
could affect the Company's future operating results include, without limitation:
uncertainties regarding implementation of the Company's business strategies;
technological risks; changes in the regulatory environment affecting the
Company; and actions of the Company's competitors and other factors set forth
under "Risk Factors."

i
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the detailed
information and financial statements and the notes thereto included elsewhere or
incorporated by reference in this Prospectus. As used herein, the terms
"Company" and "Loral" refer to Loral Space & Communications Ltd. and its wholly
owned subsidiaries and, as the context requires, its operating affiliates and,
with respect to events occurring before April 23, 1996, to the space and
communications operations of Loral Corporation, a New York corporation ("Old
Loral"), that were contributed to the Company at that time, prior to the
distribution of the Company's shares to Old Loral stockholders. Loral's wholly
owned subsidiaries include Loral SpaceCom Corporation (which operates the Loral
Skynet ("Skynet") business as a division), Space Systems/Loral, Inc. ("SS/L"),
and Loral Orion Network Systems, Inc. ("Orion"); Loral's operating affiliates
include Globalstar, L.P. ("Globalstar"), Satelites Mexicanos, S.A. de C.V.
("SatMex") and CyberStar, L.P. ("CyberStar"). Information with respect to
Globalstar Telecommunications Limited ("GTL") gives effect to a 2 for 1 stock
split effectuated in the form of a dividend paid on June 8, 1998.

THE COMPANY

Loral is one of the world's leading satellite communications companies,
with substantial interests in the design, manufacture and operation of
geosynchronous ("GEO") and low-earth-orbit ("LEO") satellite systems. Since its
formation in 1996, Loral has assembled the building blocks essential to the
creation of a seamless, global networking capability for the information age.

Loral's principal businesses are: (i) providing GEO satellite services
through the activities of Skynet, Orion, SatMex and the proposed Europe*Star
joint venture (collectively, the "Loral Global Alliance"), (ii) providing
worldwide wireless telephony and data communications through the Globalstar(TM)
System, which is expected to commence operations in early 1999, (iii) designing
and manufacturing satellites and space systems for a broad variety of customers
through SS/L, and (iv) delivering worldwide high-speed broadband data
communications through CyberStar, which plans to offer business and home users
worldwide a variety of low-cost, interactive multimedia communications services
via high-speed digital signals, which is expected to commence operations in the
second half of 1998.

Loral's strategy is to capitalize on its innovative capabilities, market
position and advanced technologies to offer value-added satellite-based services
as part of the evolving worldwide communications networks and, where
appropriate, to form strategic alliances with major telecommunications service
providers and equipment manufacturers to enhance and expand its satellite
communications service opportunities. Loral believes that demand for
satellite-based communications services will continue to grow beyond the limits
of the terrestrial infrastructure due to accelerating demand for high speed data
services, growing demand for Internet and intranet services, especially outside
the United States, increased size and scope of television programming
distribution, worldwide deregulation of telecommunications markets and
continuing technological advancement.

Following its acquisition of the Skynet business from AT&T in March 1997,
Loral has rapidly established itself through a series of subsequent acquisitions
and joint venture transactions as one of the world's leading providers of GEO
satellite-based services. Through its acquisitions of Skynet and Orion, its 49%
interest in SatMex, the joint venture that recently acquired the dominant
provider of Mexican fixed satellite services ("FSS"), and its proposed
Europe*Star joint venture with a subsidiary of Alcatel Alsthom, S.A.
("Alcatel"), Loral can offer its customers an integrated portfolio of satellite
capacity that provides "one stop shopping" for local, regional and global GEO
satellite services. The Loral Global Alliance currently has seven satellites in
service providing a total of 138 C-band and 156 Ku-band 36MHz
transponder-equivalents. The Loral Global Alliance expects to launch five
additional satellites in the next 18 months, which, together with its existing
satellites, will provide a total of 226 C-band and 357 Ku-band 36MHz
transponder-equivalents, and will have a footprint covering almost all of the
world's population. Customers include the ABC and Fox television networks in the
United States, Telmex, Bancomer, Pemex and Cemex in Mexico and Viacom, Siemens,
Asea Brown Boveri and Telecom Denmark in Europe.

1
<PAGE> 6

The Globalstar System has been designed to enable local service providers
to offer low-cost, high quality wireless voice telephony and data services in
virtually every populated area of the world. The Globalstar System has launched
eight of the 56 satellites (including eight in-orbit spares) that will complete
its full constellation and is scheduled to commence service in early 1999.
Globalstar's local service providers have already obtained some or all of the
national regulatory approvals they will need to obtain in 28 nations, including
China, the United States, Canada, Russia, Brazil, Indonesia, Saudi Arabia and
Ukraine. Loral is the managing general partner of Globalstar, and has announced
plans to increase its fully diluted ownership therein from approximately 38% to
up to 42%. See "Recent Developments -- The Globalstar Offer."

SS/L is a worldwide leader in the design, manufacture and integration of
satellites used in space-based applications. SS/L draws on its 40-year history,
during which satellites manufactured by SS/L have achieved more than 630 years
of cumulative on-orbit experience. SS/L also provides Loral with visibility into
emerging and new satellite-based technologies and applications, the latest of
which is CyberStar, a satellite-based service supporting high speed broadband
data communications. SS/L satellites support telecommunications, weather
forecasting and direct broadcast applications. SS/L is the leading supplier of
satellites to Intelsat, an international consortium of 135 member nations which
is currently the world's largest operator of commercial communications
satellites. Other significant SS/L customers include News Corp., TCI, PanAmSat,
Chinasat, Globalstar, Skynet and CD Radio.

Loral is developing CyberStar, a worldwide high-speed broadband data
communications system, which is expected to commence commercial operations in
the second half of 1998. CyberStar will leverage satellites, terrestrial
networks and a sophisticated network operations center to deliver information
securely and reliably at speeds of up to 27 Mbps to multiple locations
simultaneously, using an Internet protocol multicasting technique. CyberStar
plans to offer business and home users worldwide a variety of low-cost,
interactive multimedia communications services via high speed digital signals.
CyberStar's satellite-based services will include high-speed Internet access,
data broadcasting, broadband interconnection, intranet multicasting, real-time
streaming and other data services. CyberStar service will be delivered to
consumers, businesses and private networks worldwide through a network of local
and regional service providers.

RISK FACTORS

Prospective investors should carefully consider all of the information
contained in this Prospectus and, in particular, should evaluate the specific
factors set forth under "Risk Factors" before purchasing the Common Stock
offered hereby, including risks associated with: (i) risks of operations in a
space environment; (ii) launch risk and vehicle access; (iii) risks relating to
Globalstar; (iv) uncertainties associated with export controls, including a
pending grand jury investigation of events surrounding the failure of a Long
March rocket in 1996 and related legislative hearings (see "Business -- Export
Control Matters"); (v) the dependence of Loral on SS/L for revenue and operating
income; (vi) competition; and (vii) high degree of leverage at subsidiary and
affiliate levels.

RECENT DEVELOPMENTS--THE GLOBALSTAR OFFER

Subject to successful completion of the Offering and of the Soros
Investment described below, Loral has agreed to purchase 30% of the limited
partnership interests of Globalstar, L.P. ("Globalstar") (i.e., 4.2 million
partnership interests in the aggregate corresponding to 16.8 million shares of
common stock of Globalstar Telecommunications Limited ("GTL")) held by the
founding strategic partners of Globalstar for $420 million in cash (the
"Globalstar Purchase"), or the equivalent of $25 per share of GTL common stock.
Strategic partners participating in this transaction will reinvest one half of
their proceeds ($210 million in the aggregate) in the Globalstar System for the
purchase of Globalstar gateways and user terminals. Loral will use $175 million
of Offering proceeds to finance the Globalstar Purchase and the remaining
balance of $245 million will be provided through the concurrent sale by Loral of
8.4 million shares of GTL common stock (the "Soros Investment") that Loral
currently owns to persons or entities advised by or associated with Soros Fund
Management L.L.C. ("Soros"). See "Use of Proceeds."

Upon consummation of the Globalstar Purchase, Loral's fully diluted
ownership in Globalstar will increase from approximately 38% to 42%, after
giving effect to the Soros Investment. Soros will acquire from

2
<PAGE> 7

Loral, in lieu of Globalstar limited partnership interests, shares of GTL common
stock, which are restricted for U.S. securities law purposes, and for which GTL
has agreed to file a shelf registration statement and have such registration
statement declared effective within one year. Accordingly, Soros has agreed to
pay a premium to Loral of $4.1667 per share of GTL common stock over the price
paid by Loral in the Globalstar Purchase.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company(1):
U.S. Offering........................ 16,000,000 shares
International Offering............... 4,000,000 shares
-----------
Total............................. 20,000,000 shares
===========
Common Stock outstanding:
prior to the Offering(2)............. 219,214,692 shares
after the Offering(2)................ 239,214,692 shares
Use of Proceeds........................ The net proceeds of the Offering (after deducting
the underwriting discounts and commissions and
estimated offering expenses) are estimated to be
approximately $523 million, of which Loral will use
up to $175 million to fund the Globalstar Purchase
and the remainder will be used for general corporate
purposes, including investment in its core
businesses, to pursue emerging satellite service
opportunities worldwide and possible acquisitions.
See "Recent Developments -- The Globalstar Offer."
NYSE symbol............................ LOR
</TABLE>

- ------------------------------
(1) Excludes 3,000,000 shares of Common Stock issuable upon exercise of the
Underwriters' overallotment option.

(2) Excludes 83,170,570 shares issuable upon conversion of Series A Preferred
Stock and Series C Preferred Stock and options outstanding under the
Company's option plans to purchase 10,382,200 shares of Common Stock. All
share information in this table is based on the number of shares of Common
Stock outstanding as of March 31, 1998.

3
<PAGE> 8

LORAL SPACE & COMMUNICATIONS CORPORATE PROFILE

The following diagram sets forth a simplified schematic of Loral, its
principal businesses and its equity ownership therein.

[LORAL CORPORATE STRUCTURE CHART]

The Company was incorporated on January 12, 1996 as a Bermuda exempt
company and has its registered and principal executive offices at Cedar House,
41 Cedar Avenue, Hamilton HM12, Bermuda. The executive office of Loral SpaceCom
Corporation, the subsidiary that supervises the activities of the subsidiaries
of the Company in North America, is located at 600 Third Avenue, New York, New
York 10016 and its telephone number is (212) 697-1105.

4
<PAGE> 9

SUMMARY HISTORICAL FINANCIAL INFORMATION

The following summary historical financial information of Loral, SS/L and
Globalstar has been derived from, and should be read in conjunction with, the
related financial statements and other financial information presented in
Loral's Annual Report on Form 10-K for the year ended December 31, 1997, Loral's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and
Globalstar's Quarterly Report on Form 10-Q for the quarter ended March 1998,
which reports are incorporated herein by reference. Historical financial
information as of and for the three years in the period ended March 31, 1996,
represents the space and communications operations of Old Loral. In 1997, Loral
increased its ownership in SS/L to 100% and, accordingly, the 1997 financial
information includes the results of SS/L. In prior years SS/L was accounted for
using the equity method. At December 31, 1997, Loral had a 38% fully diluted
interest in Globalstar, and accounted for its investment using the equity
method. On March 14, 1997 Loral acquired Skynet from AT&T; Loral's financial
information includes the results of Skynet from that date. On November 17, 1997,
Loral acquired a 49% interest in SatMex, which is accounted for using the equity
method. Loral's acquisition of Orion was accounted for as a purchase and was
completed on March 20, 1998 and, accordingly, Loral's historical financial
information does not include the results of Orion; however, Orion's balance
sheet is reflected in Loral's consolidated balance sheet as of March 31, 1998.

LORAL SPACE & COMMUNICATIONS LTD.
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED MARCH 31, YEAR ENDED ENDED YEAR ENDED MARCH 31,(1)
------------------- DECEMBER 31, DECEMBER 31, ------------------------------
1998 1997 1997 1996 1996 1995 1994
-------- -------- ------------ ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................. $295,213 $340,353 $1,312,591
Management fee from affiliate......... $ 5,088 $ 5,608 $ 3,169 $ 2,981
Operating income (loss)............... 982 9,337 13,552 (12,201) 2,587 (33) 398
Equity in net income (loss) of
affiliates(2)....................... (20,370) (7,177) (47,273) (4,709) (8,628) (8,988) 1,174
Net income (loss)..................... (15,443) (406) 40,004 8,877 (13,785) (7,873) (3,694)
Preferred dividends and
accretion(3)........................ (11,606) (26,315)
Net income (loss) applicable to common
shareholders........................ (27,049) (406) 13,689 8,877 (13,785) (7,873) (3,694)
Earnings (loss) per share -- basic and
diluted............................. (0.11) 0.00 .06 .04 (.08) N/A N/A
CASH FLOW DATA:
Used in operating activities.......... $ 98,047 $ 52,468 $ 230,248 $ 3,003 $ 1,319 $ 8,439 $ 587
Used in investing activities.......... 13,738 628,810 1,022,772 1,962 115,031 92,055 25,288
Provided by (used in) equity
transactions........................ (4,293) (18,097) 602,413 116,362 100,494 25,875
Provided by financing transactions.... 114,968 106,092 316,912 583,292
Dividends paid per common share....... N/A N/A N/A
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,(1)
--------------------------- ------------------------------
MARCH 31, 1998 1997 1996 1996 1995 1994
-------------- ------------ ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 225,437 $ 226,547 $ 1,180,752 $ 12
Total assets............................. 4,536,302 3,004,936 1,699,326 354,396 $251,819 $163,479
Convertible preferred obligations(3)..... 583,292
Debt..................................... 1,444,570 435,398
Non-current liabilities.................. 176,047 190,446 26,834
Shareholders' equity(4)/Invested
equity................................. 2,419,351 1,973,245 1,070,069 354,396 251,819 159,198
</TABLE>

- ------------------------------
(1) Financial information as of and for the three years in the period ended
March 31, 1996 represents the space and communications operations of Old
Loral. The results of operations for the three years in the period ended
March 31, 1996 include allocations and estimates of certain expenses of
Loral based upon estimates of actual services performed by Old Loral on
behalf of Loral. Interest expense was allocated to Loral based on Old
Loral's historical weighted average interest rate applied to the average
investment in affiliates.

(2) The Company's affiliates are Globalstar and, since November 17, 1997,
SatMex. Loral sold its interest in K&F Industries, Inc. in 1997.

(3) Convertible preferred obligations were exchanged for 6% Series C Preferred
Stock and were reclassified to shareholders' equity in 1997 upon approval by
the Company's shareholders.

(4) As of March 31, 1998, the book value per share of the Series A Preferred
Stock and the common stock (which the Company is required to disclose herein
in accordance with applicable Bermuda law) was $6.32 and $6.31,
respectively. Book value per share represents the quotient obtained by
dividing shareholders' equity, reduced by the Series C Preferred Stock
redemption value, by the number of outstanding shares of common stock,
giving effect to the conversion of the Series A Preferred Stock, plus, in
the case of such preferred stock, the $.01 liquidation preference thereof.

5
<PAGE> 10

SPACE SYSTEMS/LORAL, INC.(1)
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED MARCH 31,
DECEMBER 31, --------------------------------------------------------
1996 1996 1995 1994
------------------ ------------------ --------------- ---------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................... $1,017,653 $1,121,619 $633,717 $596,267
Gross profit............................... 64,157 34,406 27,785 24,964
Net income................................. 31,025 12,367 5,554 3,591
</TABLE>

<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, --------------------------------------------------------
1996 1996 1995 1994
------------------ ------------------ --------------- ---------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 19,181 $ 126,863 $ 52,222 $ 26,578
Total assets............................... 1,059,064 908,677 766,475 743,016
Long-term debt............................. 127,586 65,052 34,040 92,249
Shareholders' equity....................... 478,893 447,868 435,501 429,947
</TABLE>

- ---------------
(1) Prior to consolidation in Loral's consolidated financial statements for
1997.

GLOBALSTAR, L.P.
(IN THOUSANDS)

<TABLE>
<CAPTION>
CUMULATIVE MARCH 23
MARCH 23, 1994 THREE MONTHS (COMMENCEMENT
(COMMENCEMENT ENDED MARCH 31, YEAR ENDED DECEMBER 31, OF OPERATIONS) TO
OF OPERATIONS) TO ----------------- ------------------------------ DECEMBER 31,
MARCH 31, 1998 1998 1997 1997 1996 1995 1994
----------------- ------- ------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ -- $ -- $ -- $ -- $ -- $ -- $ --
Operating loss.......... 282,110 24,761 17,582 88,071 61,025 80,226 28,027
Net loss applicable to
ordinary partnership
interests............. 280,134 24,896 20,588 88,788 71,969 68,237 26,244
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............. $ 291,931 $ 464,154 $ 21,180 $ 71,602 $ 73,560
Total assets........................... 2,189,916 2,149,053 942,913 505,391 151,271
Vendor financing liability............. 271,459 197,723 130,694 42,219
Debt................................... 1,101,527 1,099,531 96,000
Redeemable preferred partnership
interests(1)........................ 303,352 303,089 302,037
Ordinary partners' capital(1).......... 356,601 380,828 315,186 386,838 112,944
</TABLE>

- ---------------
(1) GTL called for the redemption on April 30, 1998, of all its outstanding
6 1/2% Convertible Preferred Equivalent Obligations due 2006 (the "CPEOs").
All of the CPEOs were converted before the redemption date into 20,123,230
shares of GTL common stock. As a result of such conversion, Globalstar's
RPPIs were converted into ordinary partnership interests. In connection with
the redemption, GTL issued 539,322 additional shares of GTL common stock in
satisfaction of a required interest make-whole payment. A corresponding
dividend make-whole payment was also made by Globalstar, for which ordinary
partnership interests were issued.

6
<PAGE> 11

LORAL ORION NETWORK SYSTEMS, INC.
(IN THOUSANDS)

On March 20, 1998, Loral acquired all of the outstanding stock of Orion in
exchange for Loral Common Stock. Loral issued 17.9 million shares of its Common
Stock and assumed existing Orion options and warrants to purchase 1.9 million
shares of Loral Common Stock, representing an aggregate purchase price of $469
million. Loral's consolidated statement of operations will reflect Orion's
results of operations commencing April 1, 1998. Orion's balance sheet is
reflected in Loral's consolidated balance sheet at March 31, 1998. The following
summary historical financial information of Orion has been derived from, and
should be read in conjunction with, the related consolidated financial
statements of Orion included in Loral's Current Report on Form 8-K filed April
6, 1998, and Orion's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998, which reports are incorporated herein by reference.

<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED MARCH 31, -------------------------------------------
------------------ PRO FORMA
1998 1997 1997(1) 1997 1996 1995
------- ------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................ $18,790 $20,233 $ 72,741 $ 72,741 $41,847 $22,284
Operating loss.................................. 23,639 8,317 43,498 43,081 36,353 46,831
Interest expense................................ 21,190 17,571 83,769 89,432 27,764 24,738
Net loss........................................ 39,691 25,984 105,740 108,099 27,195 26,915
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, --------------------
1998 1997 1996
---------- -------- --------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 53,801 $ 70,009 $ 32,187
Restricted and segregated cash and cash equivalents....... 325,950 356,890 10,000
Total assets.............................................. 1,431,221 896,492 358,264
Long-term debt (less current portion)(2).................. 898,119 790,671 218,237
Limited partners' interest in Orion Atlantic.............. 10,130
Redeemable preferred stock(2)............................. 76,734 20,902
Total stockholders' equity (deficit)...................... 474,000 (46,849) (436)
</TABLE>

- ---------------
(1) Adjusted to reflect the pro forma effects of certain Orion financings which
are discussed in more detail in Note 4 to the Unaudited Pro Forma Condensed
Consolidated Financial Statements for the year ended December 31, 1997,
included in Loral's Current Report on Form 8-K/A filed April 27, 1998, which
is incorporated herein by reference.

(2) In connection with the acquisition of Orion by Loral on March 20, 1998, $50
million of outstanding long-term debt and all outstanding redeemable
preferred stock were converted into common stock and the carrying value of
the Orion senior notes and senior discount notes were increased to reflect a
fair value adjustment of $148.6 million based on quoted market prices at
March 31, 1998.

7
<PAGE> 12

UNAUDITED PRO FORMA FINANCIAL INFORMATION

(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following unaudited pro forma statement of operations information
reflects, on a pro forma basis, the effects of (i) the increase in Loral's
ownership of SS/L to 100% in 1997, (ii) its acquisition of Skynet on March 14,
1997, (iii) its acquisition of a 49% interest in SatMex on November 17, 1997 and
(iv) its acquisition of Orion on March 20, 1998 as if such transactions had
occurred on January 1, 1997. Such unaudited pro forma statement of operations
data may not be indicative of the results that actually would have occurred if
the acquisitions had taken place on January 1, 1997, or future results. This
unaudited pro forma information has been derived from and should be read in
conjunction with the unaudited pro forma condensed consolidated financial
statements and related footnotes set forth in Loral's Current Report on Form 8-K
filed April 6, 1998, as amended by Loral's Current Reports on Form 8-K/A, filed
on April 27, 1998 and June 17, 1998 incorporated by reference herein.

In addition, the unaudited as adjusted balance sheet information presents
the effects of the Offering, the Globalstar Purchase, and the Soros Investment,
as if such transactions had occurred as of March 31, 1998.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1998 YEAR ENDED DECEMBER 31, 1997
--------------------- ----------------------------
LORAL LORAL
ACTUAL PRO FORMA ACTUAL PRO FORMA
-------- --------- ------------ ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................... $295,213 $314,003 $1,312,591 $1,378,441
Operating income (loss).................... 982 (13,541) 13,552 (42,867)
Equity in net income (loss) of
affiliates(1)........................... (20,370) (17,626) (47,273) (60,628)
Net income (loss)(1)....................... (15,443) (30,691) 40,004 (59,571)
Preferred dividends and accretion.......... (11,606) (11,606) (26,315) (26,315)
Net income (loss) applicable to common
shareholders(1)......................... (27,049) (42,297) 13,689 (85,886)
Earnings (loss) per common share -- basic
and diluted(1).......................... (0.11) (0.16) .06 (.32)
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-------------------------
LORAL
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 225,437 $ 573,437
Restricted and segregated cash and cash equivalents....... 336,405 336,405
Total assets.............................................. 4,536,302 5,094,302
Debt...................................................... 1,444,570 1,444,570
Non-current liabilities................................... 176,047 176,047
Shareholders' equity...................................... 2,419,351 2,977,351
</TABLE>

- ---------------
(1) As a result of the Globalstar Purchase and the Soros Investment, Loral's
ownership interest in Globalstar will increase approximately 4%, which would
have increased equity in net loss of affiliates and pro forma net loss by
$3.1 million (or $.01 per share) for the year ended December 31, 1997, and
$1.0 million (or $0.00 per share) for the three months ended March 31, 1998,
as if it had occurred January 1, 1997.

8
<PAGE> 13

RISK FACTORS

Prospective investors should carefully consider the following risk factors,
in addition to the other information contained elsewhere in this Prospectus, in
evaluating whether to purchase the Common Stock. The following risk factors
relate to the Company and its operating affiliates, including Globalstar, SatMex
and CyberStar.

RISKS OF OPERATIONS IN THE SPACE ENVIRONMENT

Satellites operate in a distant, hostile environment. Despite costly
high-reliability parts and significant on-ground testing to assure reliability
for their design lives, satellites remain vulnerable to complete or partial
failure or degradation from hazards which include space debris, solar and other
astronomical events, acts of war and component failure. Repair of satellites in
space is not practicable. In addition, a number of factors affect the useful
lives of the Company's satellites, including the quality of construction,
expected gradual environmental degradation of solar panels and the durability of
component parts. Random failure of satellite components on occasion result in
damage to or loss of a satellite ("cold failures").

Life of Globalstar's LEO Satellites. The first-generation Globalstar
satellite constellation (including spares) is designed to operate at full
performance for a minimum of 7 1/2 years, after which performance is expected
gradually to decline. However, there can be no assurance of the constellation's
useful life. Globalstar anticipates using funds from operations to develop a
second generation of satellites. If sufficient funds from operations are not
available and Globalstar is unable to obtain financing for a second-generation
constellation, Globalstar will not be able to replace its first-generation
satellites at the end of their useful lives.

Life of GEO Satellites. GEO satellites have design lives of up to 20
years. However, satellites have in the past experienced and may in the future
experience material operational anomalies and failures. For example, in 1994 and
1997, Skynet experienced the total losses of its Telstar 402 and Telstar 401
satellites, respectively, resulting in lost service and a corresponding adverse
effect on Skynet's results of operations. In November 1995, an Orion 1 component
supporting nine transponders serving the European portion of Orion 1's footprint
experienced an anomaly that resulted in a service interruption lasting
approximately two hours. Full service was restored using redundant equipment,
but, if the currently operating component fails, Orion 1 would experience a
significant loss of usable capacity, resulting in lost service and a
corresponding adverse effect on Orion's results of operations. The SatMex
Solidaridad 1 satellite is operational but has experienced anomalies, including
the loss of command receiver redundancy, a microfracture of its propulsion
subsystem and space debris-induced degradation of its telemetry encoder units
that could shorten its operational life.

Satellite Failures. In 1997, two in-orbit satellites built by SS/L
experienced solar array circuit failures. One of the customers has asserted
that, in light of the failures and uncertainty as to further failures, it has
not accepted the satellite. Loral believes that the customer was contractually
required to accept the satellite at completion of in-orbit testing and that risk
of loss has passed to the customer. In addition, another customer has requested
that SS/L structure an arrangement whereby a satellite under construction would
be sold to another customer. Management believes that these matters will not
have a material adverse effect on the financial condition or results of
operations of Loral.

Incentive Payments. Certain of SS/L's contracts provide that a portion of
the total contract price is payable in the form of "incentive" payments earned
during the life of the satellite in orbit as its mission is performed. Although
SS/L generally receives the present value of such incentive payments in the
event of launch failure or one caused by customer error, it forfeits such
revenues if the loss is caused by system failure or an error on its part. While
insurance against loss of such payments has been available in the past, its cost
and availability are subject to substantial fluctuations. In addition, SS/L is
prohibited under agreements with certain of its customers from insuring its
orbital incentives. Certain of SS/L's contracts call for on-orbit delivery,
allocating launch risk to SS/L. It is SS/L's intention to obtain insurance for
that exposure. However, SS/L cannot predict whether, and there can be no
assurance that, insurance against launch failure and loss of incentive payments
will continue to be available on reasonable terms.

9
<PAGE> 14

Inability to Obtain Adequate Insurance. As a vertically integrated space
communications company that both manufactures and operates communications
satellites, Loral is exposed to space environment-related risks in both
capacities, which may not be fully covered by insurance, if insurance is
available at all upon economically reasonable terms.

EXPORT CONTROLS; GRAND JURY INVESTIGATION; LEGISLATIVE HEARINGS

General Risks Relating to International Business. Operations in numerous
countries outside the United States carry substantial managerial, operational,
legal and political uncertainties apart from the technical risks of initiating a
previously untried telecommunications system. Such operations are subject to
changes in government regulations and telecommunications standards, tariffs or
taxes and other trade barriers. In addition, Loral's agreements relating to
local operations may be enforceable only in foreign jurisdictions so that it may
be difficult for Loral to enforce its rights. Also, limited availability of U.S.
currency in local markets may prevent a service provider from making payments in
U.S. dollars and exchange rate fluctuations may adversely affect Globalstar's,
SatMex's and Orion's revenues.

Export Controls. Various agencies and departments of the U.S. government
regulate the ability of Loral to pursue business opportunities outside the
United States. Exports of space-related products, services and technical
information frequently require licenses granted by the U.S. government. There
can be no assurance that Loral or SS/L will be able to obtain necessary licenses
or approvals, and the inability to do so, or the failure to comply with the
terms thereof when granted, could have a material adverse effect on their
respective businesses.

Grand Jury Investigation. The Company is aware of a grand jury
investigation being conducted by the office of the U.S. Attorney for the
District of Columbia with respect to possible violations of export control laws
that may have occurred in connection with the participation of SS/L employees on
a committee formed in the wake of the 1996 crash of a Long March rocket in China
and whose purpose was to consider whether studies of the crash made by the
Chinese had correctly identified the cause of the failure. While the grand jury
investigation appears to be in its preliminary stages, and SS/L is not in a
position to predict its direction or outcome, if SS/L were to be indicted and
convicted of a criminal violation of the Arms Export Control Act, it would be
subject to a fine of $1 million per violation and could be debarred from certain
export privileges and, possibly, from participation in government contracts.
Since many of SS/L's satellites are built for foreign customers and/or launched
on foreign rockets, such a debarment would have a material adverse effect on
SS/L's business, which is important to the Company. Indictment for such
violations would subject SS/L to discretionary debarment from further export
licenses. Whether or not SS/L is indicted or convicted, SS/L will remain subject
to the State Department's general statutory authority to prohibit exports of
satellites and related services if it finds a violation of the Arms Export
Control Act that puts the party's reliability in question, and it can suspend
export privileges whenever it determines that grounds for debarment exist and
that such suspension "is reasonably necessary to protect world peace or the
security or foreign policy of the United States."

As far as SS/L can determine, no sensitive information or technology was
conveyed to the Chinese, and no secret or classified information was discussed
with or reported to them. SS/L believes that its employees acted openly and in
good faith and that none engaged in intentional misconduct. Accordingly, the
Company does not believe that SS/L has committed a criminal violation of the
export control laws. The Company does not expect the grand jury investigation or
its outcome to result in a material adverse effect upon its business. However,
especially in view of the early stage of the proceedings, there can be no
assurance as to those conclusions. See "Business -- Export Control Matters."

Legislative Hearings. On May 21, 1998, the House of Representatives passed
a bill which, if passed by the Senate and enacted into law, would prohibit
exports of satellites of U.S. origin to the People's Republic of China, whether
or not an export license had theretofore been obtained. The United States Senate
has not acted on this bill. If enacted into law, these provisions would prohibit
further launches of U.S.-made satellites, including those manufactured by SS/L,
on the Long March rocket. SS/L is under contract to build one satellite which is
to be launched on a Long March rocket, for which SS/L currently holds an export
license. As of May 31, 1998, SS/L has expended $63.6 million on the satellite,
of which $48.9 million has been used to acquire common parts that could be
applied to other satellite programs if this program is canceled. In addition,

10
<PAGE> 15

SS/L has expended $48.7 million in connection with the launcher. If the House
bill or similar legislation is enacted, or if SS/L's export license is revoked
administratively, the satellite's buyers may be entitled to terminate this
contract for cause and require SS/L to refund approximately $119 million as of
May 31, 1998. In such an event, SS/L would attempt to resell the satellite and
launcher to other parties and/or use some or all of the parts on other programs.
Such resales or reuse would likely result in a loss to SS/L, which could be
substantial, and the amount of which would be affected by a number of factors
beyond the control of the Company, including the date on which the program is
terminated and how long any embargo on Chinese launchers would last, as well as
market conditions for satellites and launchers. Loss of Long March availability
would disable all U.S. satellite manufacturers, including SS/L, from competing
for satellite contract awards from customers who, for political or economic
reasons, desire Long March launches and would benefit foreign satellite
manufacturers at the expense of the Company and other domestic manufacturers.

Several Congressional committees have held hearings or announced plans to
hold hearings on U.S. satellite export policy toward China, alleged influence of
campaign contributions (including contributions made by Loral's Chairman and
CEO) on the Clinton Administration's export policy toward China and related
matters. The Company cannot predict what, if any, legislative initiatives will
result from these hearings, although they could result in passage of the House
bill described above or other legislation that could adversely affect the
Company's business.

LAUNCH RISK AND VEHICLE ACCESS

About 15% of commercial satellite launches have historically resulted in
loss before the payload reaches its planned orbit ("hot failures"). While Loral
ordinarily obtains insurance against loss due to hot failures, such events can
nevertheless disrupt and delay business schedules and cause substantial
uninsured losses above and beyond the insured cost of the lost satellite.
Loral's ability to place satellites in orbit, and SS/L's ability to perform its
on-orbit delivery contracts depend on the availability of launch vehicles and
the requisite insurance. Launch slots are limited, and the launch insurance
market has been subject to considerable fluctuation. Different launch facilities
and vehicles have different success records, but Loral, for business or
scheduling reasons does not always use, or have available to it, the most
successful facilities and vehicles for its launches. The cost and availability
of launch insurance may vary, therefore, there is no assurance that such
insurance will shield every future loss. Moreover, the availability of launches
from the republics of the former Soviet Union and the People's Republic of China
are affected by U.S. government policies and international agreements. Changes
in governmental policies or political leadership in the United States, Russia,
Kazakhstan or China could adversely affect Loral's ability to launch from these
countries or materially increase the costs to it of doing so. See
"-- Uncertainties Associated with Conducting International Business; Export
Controls."

The majority of Globalstar's satellites are scheduled for launch in three
groups of 12 satellites each aboard the Ukrainian Zenit launch vehicle. The most
recent Zenit launch (which did not involve any Globalstar satellites) ended in
failure. The next scheduled Zenit launch (of a Russian military spacecraft),
originally scheduled for May 1998, has been rescheduled to July 1998, when
another Zenit launch of a Russian payload is also scheduled. Globalstar's
initial launch on this vehicle has consequently been rescheduled for August
1998, following the two scheduled Russian launches but Globalstar does not
believe that this rescheduling will delay the Globalstar in-service date. A
Zenit launch failure could substantially delay Globalstar's launch program. A
launch incident that destroys or substantially damages the Zenit launch pad
(which is the only pad from which this rocket can be launched) would result in
further delays in Zenit availability. In the event of any Zenit failure,
Globalstar would be entitled to a free launch on Zenit, but if it elected to
forego this right and launch on another rocket, it would incur substantial
additional expense. See "Risk Factors -- Launch Risks and Vehicle Access."

RISKS RELATED TO GLOBALSTAR

Lack of Operating History. The Globalstar System will consist of 56
satellites (including eight in-orbit spares) in low earth orbit together with
ground facilities in numerous remote regions. Its operating facilities will be
in more than 100 countries, many of which are based on emerging economies,
eventually connecting hundreds of thousands of mobile and fixed telephone
handsets. While Loral believes that each component of

11
<PAGE> 16

the Globalstar System, and the Globalstar System as a whole, is capable of
performing as designed, no such complex, dispersed space/earth communications
network has ever been operated commercially. Until the Globalstar System has
operated as a whole in its actual space/earth environment, there can be no
assurance that losses due to delays, failures and unforeseen additional costs
will not occur. Globalstar's financial objectives are, in part, based on
estimates as to the potential market for Globalstar System services and the
price that users will be willing and able to pay, which cannot be practically
validated until commercial operations have begun. There can be no assurance that
such economic assumptions are justified.

Globalstar is scheduled to begin commercial operations in early 1999.
Successful commencement of operations will require successful implementation of
each of the elements of the Globalstar System -- space and ground segments,
digital communications technology, user terminal supply, service provider
arrangements and licensing. Globalstar will be dependent upon its service
providers in the various countries in which it will operate to obtain local
regulatory approvals, build gateways, distribute handsets and market Globalstar
service successfully to end users. Globalstar has launched eight satellites to
date, and expects to launch an additional 36 satellites during 1998 and 12
satellites, including eight in-orbit spares, in early 1999. However, there can
be no assurance that schedule delays will not occur and that the final cost of
implementing the Globalstar system will not be higher than anticipated.

Continuing Operating Losses. Loral's equity in net loss attributable to
its interest in Globalstar for the three months ended March 31, 1998, and the
year ended December 31, 1997, was $11.1 million and $42.5 million, respectively
(or $12.1 million and $45.6 million, respectively, after giving pro forma effect
to the Globalstar Purchase and the Soros Investment). Globalstar is expending
significant funds for the construction, testing and deployment of the Globalstar
System and such losses are expected to continue for several years following
commencement of revenue generating service operations.

Globalstar FCC License. Globalstar, along with two other applicants, was
awarded an FCC license in 1995 to construct a Big LEO system. At that time, two
other applicants, MCHI/Ellipso and Constellation, were not granted Big Leo
licenses. These decisions by the FCC's International Bureau were appealed to the
full Commission, and affirmed in 1996. MCHI/Ellipso and Constellation then filed
judicial appeals of the entire Commission order, which had both affirmed the
denial of their applications and the grant of Globalstar's license. While those
judicial appeals were pending, the International Bureau in 1997 granted Big LEO
licenses to MCHI/Ellipso and Constellation. Globalstar and others appealed these
new decisions to the full Commission, which has not yet acted. Accordingly,
MCHI/Ellipso and Constellation have asked the court to hold their judicial
appeals in abeyance pending Commission action on the appeals of the 1997
licensing decisions.

DEPENDENCE ON SS/L FOR REVENUES AND OPERATING INCOME

Currently, SS/L generates a significant portion of Loral's revenue and
operating income. Loral intends to capitalize on SS/L's capabilities, market
position and advanced technologies to identify and develop additional
space-based communications services opportunities. There can be no assurance
that current or future satellite-based ventures entered into by Loral will
result in revenues or operating income that will materially reduce its
dependence on SS/L.

In connection with delayed payment in 1997 by two Asian customers for three
GEO satellites, SS/L stopped work, reduced backlog by $291 million, which will
reduce future sales, and recorded a charge of $23 million, representing the
excess of the amount of the applicable contract receivables over the net
realizable value of the associated inventory. If the current programs for these
three satellites are not restarted, the satellites are expected to be sold to
other customers. For the year ended December 31, 1997, sales by SS/L to foreign
customers, primarily in Asia, accounted for 30% of SS/L's revenues.

SS/L has historically derived a large portion of its total revenues from a
limited number of customers, and its revenues and operating results may be
adversely affected in the event completed or canceled contracts are not promptly
replaced.

12
<PAGE> 17

The financial results of long-term fixed-price contracts are recognized
using the cost-to-cost percentage of completion method. Loral's statement of
operations reflects revisions in revenue and profit estimates in the period in
which the conditions that require the revision become known and can be
estimated. Adjustments for profits and losses may therefore have a material
effect on results for the period in question. The risks inherent in long-term,
fixed-price contracts include the forecasting of costs and schedules, contract
revenues related to contract performance (including revenues from orbital
payments) and the potential for component obsolescence in connection with
long-term procurements.

In addition, pursuant to a credit facility to which Loral SpaceCom
Corporation is a party, Loral SpaceCom and SS/L are subject to restrictions on
their ability to make cash distributions to Loral. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition -- Liquidity and
Capital Resources."

COMPETITION

Each of Loral's businesses is subject to intense competition from entities,
including several of the world's largest corporations (such as Hughes Space &
Communications, Inc., a subsidiary of General Motors Corporation, and Lockheed
Martin Corporation) as well as governments and quasi-governmental organizations
(such as Intelsat and Inmarsat), which are larger and which may bring greater
financial and operating resources to bear in competing as to marketing,
regulation and technology. Loral competes for customers and for local regulatory
approval in jurisdictions in which both Loral and a competing party may wish to
operate. In addition, Loral competes for allocation of scarce frequency
assignments and geosynchronous orbital slots. Competition comes not only from
entities carrying on or proposing to carry on the same activities as Loral (such
as PanAmSat Corporation, Iridium LLC and Teledesic Corporation), but from others
using alternative technologies such as terrestrial telecommunications and cable
television, which themselves are constantly pursuing advanced technologies in
order to enhance their competitive positions. To the extent that these entities
offer products and services which are more sophisticated, efficient or reliable
than those of Loral, there could be a material adverse effect on the financial
condition or results of operations of Loral.

COMPETITIVE BIDDING

SS/L generally obtains its contracts through competitive bidding. There can
be no assurance that SS/L will continue to be successful in having its bids
accepted or, if accepted, that awarded contracts will result in profitability
for SS/L. SS/L has in the past submitted bids which would result in minimal or
no profit due to a high level of non-recurring engineering costs. Such contracts
are generally bid with the expectation of more profitable follow-on contracts as
to which there is generally no advance assurance. To the extent that actual
costs exceed the projected costs on which bids or contract prices were based,
SS/L's profitability could be adversely affected.

REGULATION

Loral's activities, particularly its satellite operations, are subject to
licensing and regulation by authorities in more than 100 jurisdictions,
including the United States, the International Telecommunication Union ("ITU")
and the European Union. Regulated activity includes the occupation of orbital
positions ("orbital slots"), the pricing and quality of services, the use of
frequency bands, competitive behavior, the export of space-related products and
services (which frequently require licenses from the Department of State or the
Department of Commerce), and other matters essential to conduct of the business.
The regulatory authorities, depending on the location, often have broad
discretion over such activities, including, frequently, the power to modify,
withdraw or impose charges or conditions upon, or delay the grant of, the rights
required for the conduct of the business. In particular, in determining whether
to grant Loral authorization, the FCC must evaluate whether certain FCC
standards and financial qualification requirements are met. Many of the licenses
Loral holds or has applied for have been contested by third parties, including
competitors, which increase the risk of regulatory decisions adverse to Loral.
In particular, certain of Loral's orbital slots are in positions that are
subject to prior claims of parties from other countries. While regulation is an
expected incident of international telecommunications business, and Loral
expects to obtain the rights and licenses

13
<PAGE> 18

which it requires under satisfactory conditions, the broad reach of the
Globalstar System, the expansion of Skynet's operations beyond the domestic U.S.
market, the expansion of SatMex's Latin American presence, the international
service offerings of Orion, the proposed launch and operation of Orion 2 and
Orion 3 and the development of other satellite services businesses, by becoming
subject to such a large number of diverse regulatory regimes and political
systems, entail unusual risks of unforeseen costs, delays and other burdens on
planned performance. In addition, as part of the regulatory process for orbital
slot allocation of its satellites, Loral is required to engage in frequency
coordination with other satellite operators. Although Loral has in the past been
able to coordinate its existing satellites, there can be no assurance that
satisfactory coordination will be achieved in the future for any of Loral's
satellites.

Orion has begun construction of Orion 2 and Orion 3 before completion of
the required consultations with Intelsat and Eutelsat, receipt of final
authority from the FCC (in the case of Orion 2) and completion of the ITU
coordination process. Failure to obtain one or more necessary approvals on time
would have an adverse effect on Orion's business or results of operations.

POTENTIAL CONFLICTS OF INTEREST; LACK OF FULL CONTROL

Although Loral is the managing general partner of Globalstar, its
management control over Globalstar is limited by the supermajority rights of
Globalstar's limited partners. Additionally, primary operational control of
SatMex is vested in Mexican nationals, as required by Mexican law, subject to
certain supermajority rights of Loral. The proposed Europe*Star joint venture
was initiated by Alcatel and will be under Alcatel's control, subject to
supermajority rights of Loral. Future Loral/Alcatel joint ventures within the
Skynet Global Alliance will be under the control of the initiating party,
subject to supermajority rights in favor of the non-initiating party. Alcatel is
an investor in CyberStar, and has supermajority rights therein. In addition,
although Orion is a wholly owned Loral subsidiary, its outstanding debt is
non-recourse to Loral, which could result in conflicting duties under certain
circumstances. As a result, the rights of third parties and fiduciary duties
under applicable law could result in such entities taking actions that are not
in Loral's own best interests or in refraining to take actions that Loral deems
advisable. To the extent that such entities are or become customers of SS/L,
such conflicts could become acute.

Both Skynet and Orion own or are building satellites whose footprints
overlap with present and proposed satellites of SatMex and Europe*Star and may,
therefore, compete directly with SatMex and Europe*Star for customers in some of
their markets. Although Skynet, SatMex and Orion have adopted (and Europe*Star
is expected to adopt) a marketing policy which will provide for cross-selling of
capacity, situations may arise where conflicts will remain. These conflicts will
become particularly acute if there is an oversupply of satellite transponder
capacity in the market.

Partners and affiliates of Globalstar, including companies affiliated with
Loral, will be among Globalstar's service provider customers and may, therefore,
have conflicts with Globalstar and/or Loral as to service provider agreements.

LEVERAGE AT SUBSIDIARY AND AFFILIATE LEVELS

General. Loral's core businesses are capital-intensive and generally
require substantial investment before anticipated returns on investment can be
realized. Moreover, Loral is subject to substantial financial risks in the face
of possible delays or reductions in revenue realization, unforeseen capital
requirements or unanticipated expenses attributable to the factors described in
this Prospectus. Such risks could result not only in adverse financial results
due to ongoing debt service charges, but also in the necessity for additional
financing, which could result in increased debt and debt service costs,
potential dilution of equity interests resulting from issuances of debt or
equity, rights to distributions senior to those of the holders of the Common
Stock and covenants restricting distributions to holders of the Common Stock.

Leverage at Loral and Subsidiaries. Although Loral Space & Communications
Ltd. has no material indebtedness for borrowed money, and has not (except as
noted below with respect to the SatMex government obligation and a portion of
Globalstar's bank debt) guaranteed or otherwise assumed responsibility for the
obligations of its subsidiaries and operating affiliates, some of those entities
are highly leveraged, and the

14
<PAGE> 19

instruments and agreements evidencing such debt severely limit their ability to
pay dividends or make other distributions to their respective corporate parent.
Any material and continuing failure on the part of such subsidiaries or
affiliates to meet the obligations in respect of outstanding indebtedness could
result in Loral Space & Communications Ltd.'s being required to make additional
investments therein or risk the partial or total loss of its equity investments
therein and control thereof.

As of March 31, 1998, $554.2 million was outstanding primarily under an
$850 million credit facility provided to Loral SpaceCom Corporation by a group
of banks. At March 31, 1998, Loral had a deficiency of earnings to fixed charges
of $20.5 million. In addition, Loral had outstanding at March 31, 1998, Series C
Convertible Redeemable Preferred Stock having a redemption value of $745.5
million, which may be payable at Loral's option in cash, Common Stock, or a
combination thereof. At March 31, 1998, Loral had $1.4 billion in consolidated
debt.

Leverage at SatMex. A significant portion of the SatMex purchase price was
financed with debt, including a $125.1 million obligation to the Mexican
government. Loral and Telefonica Autrey have agreed to maintain assets in a
collateral trust in an amount equal to the value of the government obligation
through December 30, 2000 and, thereafter, in an amount equal to 1.2 times the
principal amount of the government obligation until maturity.

Leverage at Globalstar. Globalstar is still in the development stage. At
March 31, 1998, Globalstar had outstanding long-term indebtedness of $1.1
billion. In May 1998, Globalstar incurred additional indebtedness of $300
million. Loral is contingently liable with respect to approximately $68 million
of Globalstar's $250 million revolving line of credit, which is undrawn as of
the date hereof.

Leverage at Orion. At March 31, 1998, Orion had outstanding $445 million
principal amount of senior notes due 2007 (the "Senior Notes") and $484 million
principal amount of senior discount notes due 2007 (the "Senior Discount
Notes"), which senior discount notes had an accreted value of approximately
$301.6 million as of such date.

OBSOLESCENCE DUE TO RAPID TECHNOLOGICAL CHANGE

Like other high technology enterprises, Loral's businesses are subject to
obsolescence due to new technological developments. The rapid pace of
technological change exposes Loral to risk of loss due to the deployment of
superior technologies by competitors. Loral is also dependent upon technologies
developed by third parties to implement key aspects of its strategy to integrate
its satellite systems with terrestrial networks. As land-based
telecommunications services expand, demand for certain types of satellite-based
services may be reduced. New technology used by competitors could render
satellite-based services less competitive by satisfying consumer demand in
alternative ways or through the use of incompatible telecommunications
standards. In addition, SS/L's success depends on its ability to introduce
innovative new products and services on a cost-effective and timely basis.

YEAR 2000 ISSUE

The Company is evaluating the potential effect on its information
processing systems to determine what actions will be necessary or appropriate in
connection with the "Year 2000 Issue." The Year 2000 Issue is the result of
computer programs which were written using two digits rather than four to
signify a year (i.e., the year 1997 is denoted "97" and not "1997"). Computer
programs written using only two digits may recognize the year 2000 as the year
1900. This could result in a system failure or miscalculations causing
disruption of operations. It is not known at this time what modifications, if
any, will be required. All costs associated with any modification will be
expensed as incurred. In addition, the Company has requested, and will continue
to seek, information from third-party entities on which it relies, certifying
that their computer systems will not negatively affect Loral's operations. No
assurance can be given that there will not be some unforeseen issue, in
particular, in connection with third parties' systems, that may materially
affect Loral's operations.

15
<PAGE> 20

RELIANCE ON KEY PERSONNEL

The success of Loral is dependent upon the ability of Loral to attract and
retain highly qualified personnel. Except for Mr. Bernard L. Schwartz, Loral's
Chairman and Chief Executive Officer, none of the officers of Loral has an
employment contract with Loral nor does Loral expect to maintain "key man" life
insurance. The loss of any of these individuals and the subsequent effect on
business relationships could have an adverse effect on the business or results
of operations of Loral.

SHARES ELIGIBLE FOR FUTURE SALE; DILUTION

As of March 31, 1998, the Company had outstanding 219,214,692 shares of
Common Stock. In addition, 45,896,977 shares of Common Stock will be issuable
upon conversion of the Series A Convertible Preferred Stock and 37,273,593
shares of Common Stock will be issuable upon the conversion of the 6% Series C
Convertible Redeemable Preferred Stock. As of March 31, 1998, an aggregate of
10,382,200 options were outstanding to purchase shares of Common Stock under the
Company's stock option plans. Sales of substantial amounts of Common Stock in
the public market, or the perception that such sales could occur, could
adversely affect the market price of the Common Stock. In addition, the Company
may sell additional equity interests in the future, diluting the percentage
ownership in the Company represented by the Common Stock.

RIGHTS OF SHAREHOLDERS UNDER BERMUDA LAW

The Company is incorporated under the laws of the Islands of Bermuda.
Principles of law relating to such matters as the validity of corporate
procedures, the fiduciary duties of the Company's management, directors and
controlling shareholders, and the rights of its shareholders, are governed by
Bermuda law and the Company's Memorandum of Association and Bye-Laws. Such
principles of law may differ from those that would apply if the Company were
incorporated in a jurisdiction in the United States. In addition, there is
uncertainty as to whether the courts of Bermuda would enforce (i) judgments of
United States courts obtained against the Company or its officers and directors
resident in foreign countries predicated upon the civil liability provisions of
the securities laws of the United States or (ii) in original actions brought in
Bermuda, liabilities against the Company or such persons predicated upon the
securities laws of the United States or any state. See "Description of Capital
Stock -- Bermuda Law."

VOLATILITY

The trading price of the Common Stock has been volatile. See "Price Range
of Common Stock." Factors such as announcements of fluctuations in the Company's
or its competitors' operating results and market conditions for growth stocks or
technology stocks in general could have a significant impact on the future
trading price of the Common Stock. In particular, the trading price of the
common stock of many technology companies has experienced extreme price and
volume fluctuations, which have at times been unrelated to the operating
performance of such companies whose stocks were affected. In addition, the
trading price of the Common Stock could be subject to significant fluctuations
in response to variations in the Company's prospects and operating results which
will in turn be affected by the performance of its operating affiliates and
other factors. There can be no assurance that these factors will not have an
adverse effect on the trading price of the Common Stock.

16
<PAGE> 21

USE OF PROCEEDS

The net proceeds of the Offering (after deducting the underwriting
discounts and commissions and estimated offering expenses) are estimated to be
approximately $523 million, of which Loral will use $175 million to fund the
Globalstar Purchase, and the remainder will be used for general corporate
purposes, including investment in its core businesses, to pursue emerging
satellite service opportunities worldwide and possible acquisitions. Pending
such use, the net proceeds will be invested in short-term investment grade debt
securities.

DIVIDEND POLICY

The Company has never declared or paid cash dividends on its Common Stock
and does not anticipate paying any cash dividends in the foreseeable future. In
addition, loan agreements and indentures restrict certain of the Company's
subsidiaries and operating affiliates from transferring cash or paying dividends
to Loral on their capital stock. As required, Loral is currently paying
dividends on its Series C Preferred Stock. See Note 7 to Loral's 1997
consolidated financial statements included in Loral's Annual Report on Form 10-K
for the year ended December 31, 1997, which is incorporated by reference in this
Prospectus.

PRICE RANGE OF COMMON STOCK

The Common Stock of Loral is quoted on the NYSE under the symbol "LOR." The
following table sets forth, for the periods indicated, the range of high and low
sale prices for the Common Stock as reported on the NYSE since the Common Stock
commenced public trading on April 15, 1996.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1996
Second Quarter (from April 15)............................ $18 1/2 $10 1/2
Third Quarter............................................. 16 5/8 11 1/8
Fourth Quarter............................................ 19 5/8 15 1/4

1997
First Quarter............................................. 19 1/4 14 1/8
Second Quarter............................................ 17 1/2 13
Third Quarter............................................. 21 14 1/16
Fourth Quarter............................................ 24 1/4 19

1998
First Quarter............................................. 30 1/2 19
Second Quarter (through June 24).......................... 33 15/16 24 1/2
</TABLE>

As of March 31, 1998, there were 219,214,692 shares of Common Stock
outstanding. On June 24, 1998, the last reported sale price of the Common Stock
as reported on the NYSE was $26 7/8 per share.

17
<PAGE> 22

CAPITALIZATION

The following table sets forth, as of March 31, 1998, (i) the cash and cash
equivalents and capitalization of the Company and (ii) the cash and cash
equivalents and capitalization of the Company as adjusted to give effect to the
net proceeds of the Offering, the Globalstar Purchase and the Soros Investment.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-----------------------------
(DOLLARS IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
LORAL ACTUAL AS ADJUSTED
------------- ------------
<S> <C> <C>
Cash and cash equivalents................................... $ 225,437 $ 573,437
========== ==========
Restricted and segregated cash and cash equivalents(1)...... $ 336,405 $ 336,405
========== ==========
Long-term debt, including current portion................... $1,444,570 $1,444,570
Shareholders' equity:
Series A convertible preferred stock, par value $.01 per
share; 150,000,000 shares authorized, and 45,896,977
shares issued and outstanding actual and as adjusted... 459 459
Series B preferred stock, par value $.01 per share;
750,000 shares authorized and unissued actual and as
adjusted(2)............................................
6% Series C convertible redeemable preferred stock
($745,472 redemption value), par value $.01 per share;
20,000,000 shares authorized, 14,909,437 shares issued
and outstanding actual and as adjusted................. 734,178 734,178
Common stock, par value $.01 per share; 750,000,000 shares
authorized, 219,214,692 shares issued actual; and
239,214,692 shares issued as adjusted.................. 2,193 2,393
Paid-in capital........................................... 1,700,810 2,223,610
Retained earnings (deficit)(3)............................ (4,483) 30,517
Unearned compensation..................................... (10,446) (10,446)
Treasury stock, at cost; 174,195 shares................... (3,360) (3,360)
---------- ----------
Total shareholders' equity............................. 2,419,351 2,977,351
---------- ----------
Total capitalization.............................. $3,863,921 $4,421,921
========== ==========
</TABLE>

- ---------------
(1) Restricted and segregated cash and cash equivalents are set aside for the
next four interest payments on certain outstanding debt of Orion and to make
payments for additional Orion satellites or on such debt.
(2) Represents preferred stock underlying the Company's rights plan.

(3) As adjusted reflects the gain of $35 million to be recorded in connection
with the Soros Investment.

18
<PAGE> 23

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Except for the historical information contained herein, the matters
discussed in the following Management's Discussion and Analysis of Results of
Operations and Financial Condition of the Company, Globalstar, SatMex and Orion,
and elsewhere in this Prospectus, are forward-looking statements that involve
risks and uncertainties, many of which may be beyond the companies' control. The
actual results that the companies achieve may differ materially from any
forward-looking projections due to such risks and uncertainties.

Loral Space & Communications Ltd. and its subsidiaries (the "Company" or
"Loral") is one of the world's leading satellite companies, with substantial
activities in both satellite manufacturing and satellite-based communications
services. Space Systems/Loral, Inc. ("SS/L") is a leading designer and
manufacturer of space systems. Loral Skynet ("Skynet"), acquired on March 14,
1997, is a leading provider of satellite communications services in the United
States. Skynet owns and operates the Telstar satellite network and is expanding
its business internationally. On November 17, 1997, a joint venture including
Loral and another partner acquired 75% of SatMex, a satellite services provider
to Mexico and South America. Loral also manages and is the largest equity owner
of Globalstar, L.P. ("Globalstar"), a global, mobile satellite telephony system
scheduled for service initiation in early 1999. Loral is pursuing additional
satellite-based communications service opportunities, including CyberStar, a
proposed worldwide high-speed broadband data services system initially using
leased Ku-band transponder capacity on Skynet's Telstar 5 satellite. In
addition, on March 20, 1998, Loral acquired Orion Network Systems, Inc.
("Orion"), a corporate data networking and satellite services company with
operations in the United States and Europe that will be expanded to Asia/
Pacific and South America in 1998 and the first half of 1999, respectively.

Loral was formed to effectuate the distribution of Loral Corporation's
("Old Loral") space and communications businesses (the "Distribution") to
shareholders of Old Loral pursuant to a merger agreement (the "Merger") dated
January 7, 1996 between Old Loral and Lockheed Martin Corporation ("Lockheed
Martin"). Loral operates on a December 31 fiscal year-end. The space and
communications operations of Old Loral operated under a March 31 year-end.

RESULTS OF OPERATIONS

In 1997 and 1998, Loral accelerated its transformation from a company with
extensive equity investments to a major satellite manufacturer and provider of
satellite services by making a number of acquisitions that significantly
affected its results of operations.

In February 1997, Loral agreed to acquire the remaining 49% of the common
stock of SS/L held by four international aerospace and communications companies
(the "Alliance Partners") for $374 million paid in cash and Loral securities. On
March 14, 1997, Loral acquired Skynet for $462.1 million in cash.

The acquisition of Skynet and the remaining equity interest in SS/L have
been accounted for as purchases. Loral's consolidated financial statements for
the quarter ended March 31, 1997, reflect the results of operations of SS/L from
January 1, 1997, the elimination of the minority interest of the SS/L equity not
owned by Loral during the period and the results of operations of Skynet from
March 14, 1997. Prior to January 1, 1997, SS/L was accounted for using the
equity method of accounting.

In connection with the privatization by the Mexican Government of its fixed
satellite services business, Loral and Telefonica Autrey, S.A. de C.V.
("Telefonica Autrey") formed a joint venture, Firmamento Mexicano, S. de R.L. de
C.V. ("Holdings"). On November 17, 1997, Holdings acquired 75% of the
outstanding capital stock of SatMex for $646.8 million. The purchase price was
financed by a Loral equity contribution of $94.6 million, a Telefonica Autrey
equity contribution of $50.9 million and debt issued by Holdings. As part of the
acquisition, Holdings issued a $125.1 million seven year government obligation
("Government Obligation") bearing interest at 6.03% to the Mexican Government in
consideration for the assumption by SatMex of the debt incurred by Holdings in
connection with the acquisition. The debt of SatMex and Holdings is non-recourse
to Loral and Telefonica Autrey. However, Loral and Telefonica Autrey have agreed
to maintain assets in a collateral trust in an amount equal to the value of the
Government Obligation through December 31, 2000 and, thereafter, in an amount
equal to 1.2 times the value of the

19
<PAGE> 24

Government Obligation until maturity. Loral has a 65% economic interest in
Holdings and a 49% indirect economic interest in SatMex. Loral accounts for
SatMex using the equity method from November 17, 1997.

On March 20, 1998, Loral acquired all of the outstanding stock of Orion in
exchange for Loral common stock. Loral issued 17.9 million shares of its common
stock and assumed existing Orion options and warrants to purchase 1.9 million
shares of Loral common stock representing an aggregate purchase price of $469
million. Loral's consolidated statement of operations will reflect the results
of Orion commencing April 1, 1998. Orion's balance sheet is reflected in Loral's
consolidated balance sheet at March 31, 1998.

Taxation: Loral is subject to U.S. Federal, state and local income
taxation at regular corporate rates on any income that is effectively connected
with the conduct of a U.S. trade or business. When such income is deemed removed
from the U.S. business, it is subject to an additional 30% "branch profits" tax.
Loral expects that a significant portion of its income will be from foreign
sources and will not be effectively connected with a U.S. trade or business;
some portion of this income, however, will be subject to taxation by certain
foreign countries.

The Company's U.S. subsidiaries are subject to U.S. taxes on their
worldwide income. In addition, a 30% U.S. withholding tax will be imposed on
dividends and interest paid by such subsidiaries to Loral Space & Communications
Ltd.

COMPARISON OF RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND THE
THREE MONTHS ENDED MARCH 31, 1997

Revenues for the quarter ended March 31, 1998 totaled $336.9 million,
before elimination of intercompany sales of $41.7 million, compared to revenues
of $341.9 million and elimination of intercompany sales of $1.6 million for the
quarter ended March 31, 1997. SS/L's 1998 revenues were $308.3 million before
intercompany eliminations of $40.8 million compared to revenues of $338.4
million and intercompany eliminations of $1.6 million in 1997. The decrease in
SS/L sales is primarily due to the stoppage of work on three Asian satellites in
the fourth quarter of 1997. The increase in the intercompany eliminations
reflects the classification of the construction of Skynet's satellites by SS/L
as intercompany sales subsequent to the acquisition of Skynet. Skynet's revenues
for the quarter ended March 31, 1998 were $27.7 million compared to $3.6 million
for the period March 14, 1997 through March 31, 1997; reflecting the inclusion
of a full quarter of Skynet's revenues in 1998.

Earnings before interest, taxes, depreciation and amortization
("EBITDA")(1) for the three months ended March 31, 1998 and 1997 were as follows
(in millions):

<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
SS/L........................................................ $19.1 $22.5
Skynet -- from March 14, 1997............................... 15.5 1.9
Corporate expenses and intercompany eliminations............ (8.8) (2.9)
----- -----
EBITDA before CyberStar and Globalstar development costs.... 25.8 21.5
SatMex(2)................................................... 9.4
----- -----
Adjusted EBITDA before CyberStar and Globalstar development
costs(3).................................................. $35.2 $21.5
===== =====
</TABLE>

- ---------------
(1) EBITDA is provided because it is a measure commonly used in the
communications industry to analyze companies on the basis of operating
performance, leverage and liquidity and is presented to enhance the
understanding of Loral's operating results. However, EBITDA should not be
construed as an alternative to net income as an indicator of a company's
operating performance, or cash flow from operations as a measure of a
company's liquidity. EBITDA as presented may be calculated differently and,
therefore, may not be comparable to similarly titled measures reported by
other companies.

(2) Represents Loral's proportionate share of SatMex's EBITDA.

(3) Development costs for the three months ended March 31, 1998 and 1997, for
CyberStar were $7.3 million and $2.6 million, respectively and Loral's
proportionate share of Globalstar's development costs was $9.8 million and
$6.3 million, respectively.

EBITDA before development costs was $25.8 million for 1998 compared to
$21.5 million for 1997. CyberStar development costs were $7.3 million in 1998
compared to $2.6 million in 1997 reflecting increased spending levels in 1998
for product development, marketing expenditures and increased headcount.
Depreciation and amortization was $17.4 million and $9.6 million for 1998 and
1997, respectively. The increase in

20
<PAGE> 25

depreciation and amortization in 1998 primarily results from the inclusion of
Skynet's depreciation and amortization for a full quarter including the
depreciation of Skynet's Telstar 5 satellite which was placed in service on July
1, 1997. As a result of the above, operating income was $1.0 million for 1998
compared to $9.3 million for 1997.

Interest income for the quarter ended March 31, 1998, of $8.7 million
represents $6.7 million of interest earned on available cash during the period
and interest on GTL's Convertible Preferred Equivalent Obligations ("GTL
Convertible Preferreds") held by Loral, and $2.0 million of interest earned on
orbital incentive payments. Interest income for the quarter ended March 31,
1997, of $20.1 million represents $18.5 million of interest earned on the
investment of available cash during the period and interest on the GTL
Convertible Preferreds held by Loral and $1.6 million of interest earned on
orbital incentive payments.

Interest expense of $1.7 million, net of capitalized interest of $9.5
million, for the quarter ended March 31, 1998 reflects interest on borrowings
under Loral's credit agreement. Interest expense of $10.0 million, net of
capitalized interest of $2.5 million, for the quarter ended March 31, 1997,
reflects the assumption of SS/L's debt and interest on Loral's outstanding
Convertible Preferred Equivalent Obligations ("CPEO's"). On June 5, 1997, the
CPEO's were exchanged for Loral 6% Series C Convertible Redeemable Preferred
Stock ("Series C Preferred Stock").

The Company's effective income tax rate was 38.6% for 1998 and 48% for
1997. The effective income tax rates are higher than the statutory U.S. Federal
income tax rate primarily because of the impact of state and local income taxes
and the non-deductible amortization of cost in excess of net assets acquired
offset by the portion of the Company's foreign source income which is not
subject to Federal taxation.

The minority interest expense in 1997 reflects the reduction of SS/L's
income attributed to the Alliance Partners.

The equity in net loss of affiliates was $20.4 million in 1998 compared to
$7.2 million for 1997. Loral's share of Globalstar's losses was $11.1 million in
1998 compared to $7.2 million in 1997 reflecting Globalstar's increased
development costs as well as an increased ownership percentage by Loral. Also
included in the equity in net loss of affiliates for 1998 is Loral's share of
SatMex's loss of $6.9 million and Loral's portion of losses from other
affiliates of $2.4 million.

Preferred dividends of $11.6 million in the three months ended March 31,
1998 relate to the Series C Preferred Stock, which was not outstanding at March
31, 1997.

As a result of the above, net loss applicable to common stockholders for
1998 was $27.0 million or $.11 per diluted share, compared to $406,000 or $0.00
per diluted share, for 1997. Diluted weighted average shares were 249.3 million
for 1998 and 237.0 million for 1997.

COMPARISON OF RESULTS OF THE YEAR ENDED DECEMBER 31, 1997 AND THE
NINE MONTHS ENDED DECEMBER 31, 1996

Revenues for the year ended December 31, 1997 totaled $1.5 billion before
elimination of intercompany sales of $200.1 million. SS/L's sales were $1.4
billion before elimination of intercompany eliminations of $199.3 million.
SS/L's commercial sales were $1.1 billion, including sales to Globalstar of
$408.1 million, and sales to the U.S. government were $90.5 million. Skynet's
sales were $69.3 million from date of acquisition to December 31, 1997. Revenue
for the nine months ended December 31, 1996, represented management fees earned
from SS/L of $5.1 million.

21
<PAGE> 26

Earnings before interest, taxes, depreciation and amortization
("EBITDA")(1) for 1997 is as follows (in millions):

<TABLE>
<S> <C>
SS/L........................................................ $ 99.7
Skynet -- from March 14, 1997............................... 42.0
Corporate expenses and intercompany elimination............. (33.2)
------
EBITDA before CyberStar and Globalstar development costs.... 108.5
SatMex(2)................................................... 5.1
------
Adjusted EBITDA before CyberStar and Globalstar development
costs(3).................................................. $113.6
======
</TABLE>

(2) Represents Loral's proportionate share of SatMex's EBITDA from November 17,
1997.

(3) Development costs for CyberStar were $32.2 million and Loral's proportionate
share of Globalstar's development costs was $33.3 million.

EBITDA before development costs was $108.5 million in 1997. CyberStar
development costs were $32.2 million and depreciation and amortization was $62.7
million, resulting in operating income for 1997 of $13.6 million. The nine
months ended December 31, 1996, reflected an operating loss of $12.2 million
primarily due to corporate expenses of $17.3 million.

In connection with delayed payment in 1997 by two Asian customers for three
satellites, SS/L stopped work, reduced backlog by $291 million, which will
reduce future sales, and recorded a charge of $23 million. If the current
programs for these three satellites are not restarted, the satellites will be
sold to other customers.

Interest income of $49.1 million for the year ended December 31, 1997
represents $42.6 million of interest earned on the investment of available cash
during the year and interest on the GTL Convertible Preferred Equivalent
Obligations ("GTL Convertible Preferreds") held by Loral (See Note 6 to Loral's
1997 consolidated financial statements which are included in Loral's Annual
Report on Form 10-K for the year ended December 31, 1997, which is incorporated
herein by reference), and $6.5 million of interest earned on orbital incentive
payments. Interest income for the nine months ended December 31, 1996 of $34.7
million reflects the investment of available cash during the period and interest
on the GTL Convertible Preferreds.

Interest expense of $15.2 million, net of capitalized interest of $22.6
million, for 1997, reflects the assumption of SS/L's debt, borrowings under the
Credit Agreement (see Note 7 to Loral's 1997 consolidated financial statements
which are included in Loral's Annual Report on Form 10-K for the year ended
December 31, 1997, which is incorporated herein by reference) and interest on
Loral's outstanding Convertible Preferred Equivalent Obligations ("CPEOs") until
June 5, 1997, when the CPEOs were exchanged for Loral 6% Series C Convertible
Redeemable Preferred Stock ("Series C Preferred Stock"). Preferred dividends in
1997 of $26.3 million result from the exchange of the Company's CPEOs for Series
C Preferred Stock. Interest expense for the nine months ended December 31, 1996
of $6.0 million reflects interest on the CPEOs for one quarter.

The results of operations for 1997, reflect the gain on sale of K&F stock
of $79.6 million, net of expenses.

The Company's effective income tax rate for 1997 was 27.5%. The current
year effective rate is lower than the statutory U.S. Federal income tax rate
because, as a Bermuda company, a substantial portion of the Company's income is
foreign source income not subject to Federal taxation.

The minority interest expense in 1997 reflects the reduction of SS/L's
income attributed to the Alliance Partners.

The equity in net loss of affiliates for 1997 of $47.3 million reflects
increased development costs at Globalstar as well as an increased ownership
percentage by Loral in Globalstar. In addition, in connection with Loral's
investment in SatMex in 1997, Loral recorded its share of SatMex's losses of
$6.4 million. The equity in net loss of affiliates for the nine months ended
December 31, 1996 reflects the Company's share of

22
<PAGE> 27

Globalstar losses of $18.1 million offset by the Company's share of SS/L's
income of $13.4 million. In 1997, the Company discontinued using the equity
method for SS/L and fully consolidated SS/L's results of operations.

As a result of the above, net income applicable to common stockholders for
1997 was $13.7 million, or $0.06 per diluted share, compared to $8.9 million, or
$0.04 per diluted share, for the nine months ended December 31, 1996. Diluted
weighted average shares were 243.6 million for 1997 and 229.4 million for the
nine months ended December 31, 1996.

SUMMARY RESULTS OF OPERATIONS OF AFFILIATES

Globalstar

Globalstar is a development stage partnership and has not commenced
commercial service operations. The net loss applicable to ordinary partnership
interests for the quarter ended March 31, 1998 was $24.9 million as compared to
$20.6 million for the quarter ended March 31, 1997. The increase in the net loss
is a result of increased marketing, general and administrative expenses of $1.9
million and an increase in development costs of $5.3 million as a result of
increased activity in the development of Globalstar's user terminals, offset by
an increase in interest income of $2.9 million as a result of higher average
cash balances available for investment. The net loss applicable to ordinary
partnership interests for the year ended December 31, 1997 was $88.8 million as
compared to $56.6 million for the nine months ended December 31, 1996. The
increase in the net loss is a result of increased marketing, general and
administrative expenses of $10.7 million and an increase in development costs of
$31.7 million as a result of increased activity in the development of
Globalstar's user terminals, offset by an increase in interest income of $15.6
million as a result of higher average cash balances available for investment.
Globalstar is expending significant funds for the construction, testing and
deployment of the Globalstar System and expects such losses to continue through
commencement of revenue generating service operations.

SatMex

For the quarter ended March 31, 1998, SatMex had revenues, EBITDA,
operating income and a net loss of $25.4 million, $19.7 million, $6.7 million
and $13.8 million, respectively. The net loss is primarily attributed to
interest expense of $21.9 million on debt issued to finance the acquisition,
which includes a charge for $10.5 million of fees associated with debt
refinancing. For the period November 17, 1997 to December 31, 1997, SatMex had
revenues, EBITDA, operating income and a net loss of $12.6 million, $9.6
million, $4.0 million and $4.4 million, respectively. The net loss is primarily
attributed to interest expense of $14.8 million on debt issued to finance the
acquisition, partially offset by foreign exchange gains of $8.7 million. SatMex
expects such losses to continue through 1999 until funds from operations are
available to reduce outstanding debt.

LIQUIDITY AND CAPITAL RESOURCES

Loral intends to capitalize on its innovative capabilities, market position
and advanced technologies to offer value-added satellite-based services as part
of the evolving worldwide communications networks and, where appropriate, to
form strategic alliances with major telecommunications service providers and
equipment manufacturers to enhance and expand its satellite-based communications
service opportunities. In order to pursue such opportunities, Loral may seek
funds from strategic partners and other investors, through incurrence of debt or
the issuance of additional equity.

At March 31, 1998, Loral had $225.4 million of cash and cash equivalents.
Loral intends to utilize its existing capital base and access to the capital
markets to construct and operate additional satellites, make additional
investments in Globalstar and Globalstar service provider opportunities and
invest in additional satellite communications service opportunities.

At March 31, 1998, Orion had $326 million of restricted cash and cash
equivalents, to be used for the satellites under construction and interest
payments, and debt of $890.4 million. Orion's outstanding debt is non-recourse
to Loral. Substantially all of Orion's senior notes and senior discount notes
remained outstanding following the expiration, on May 21, 1998, of an Orion
offer to repurchase the notes, which it made pursuant to the applicable
indentures as a result of its recent change of control.

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On November 14, 1997, the Company, through its wholly owned subsidiary
Loral SpaceCom Corporation, entered into a $850 million credit facility with a
group of banks. The facility consists of a $500 million revolving credit
facility, a $275 million term loan and a $75 million letter of credit facility.
The facility replaced SS/L's existing credit facility. The facility is secured
by the stock of Loral SpaceCom Corporation and SS/L and contains various
covenants including an interest coverage ratio, debt to capitalization ratios
and restrictions on cash transfers to its parent. At March 31, 1998, there was
$554.2 million outstanding under this agreement and other credit facilities.

On April 24, 1998, Loral announced a series of transactions which, if
completed, will have the effect of (1) increasing Loral's fully diluted
ownership in Globalstar to 42%, (2) establishing a Globalstar service provider
fund of $210 million for reinvestment in the Globalstar project through the
purchase of Globalstar gateways and user terminals and (3) the acquisition by
entities advised by or affiliated with Soros Fund Management L.L.C. ("Soros") of
8.4 million shares of Globalstar Telecommunications Limited ("GTL") common stock
currently held by Loral.

Loral has agreed to purchase (the "Globalstar Purchase") 4.2 million
partnership interests in Globalstar (corresponding to 16.8 million shares of GTL
common stock) from its original service provider partners for $100 per
partnership interest (corresponding to $25 per share of GTL stock). Partners
participating in the transaction will reinvest one-half of their proceeds, or
$210 million in the aggregate, into the Globalstar project by establishing an
escrow account to be used solely for the purchase of Globalstar gateways and
handsets.

Concurrently, Loral will sell to Soros 8.4 million GTL shares for an
aggregate purchase price of $245 million (the "Soros Transaction"). Soros will
be acquiring GTL stock in lieu of Globalstar limited partnership interests at a
premium of $4.1667 a share over the price paid by Loral in the Globalstar
Purchase. The shares to be purchased by Soros will be restricted and may not be
sold without registration. GTL, however, has agreed to provide a
shelf-registration for these shares to be effective one year after their
purchase.

Upon consummation of the Globalstar Purchase and the Soros Transaction,
Loral's direct and indirect fully diluted ownership in Globalstar will increase
from approximately 38% to approximately 42%. Soros's indirect ownership in
Globalstar through this transaction would equal approximately 4%. The Globalstar
Purchase is contingent upon completing the Loral equity offering, the closing of
the transaction with the Soros funds and the satisfaction of all requirements
under the partnership agreements and applicable laws and regulations.

In February 1998, Loral and Alcatel Alsthom ("Alcatel") announced that they
will jointly build and operate Europe*Star, a multiple geostationary satellite
system that will provide broadcast and telecommunications services to Europe,
the Middle East, Southeast Asia, India and South Africa. Alcatel will serve as
the primary contractor of the Europe*Star turnkey system. SS/L will provide the
satellite bus and test and integrate the satellites. Loral's initial investment
in this joint venture was $5 million.

Skynet: Skynet currently has two high-powered satellites operating in
orbit. Loral intends to expand Skynet's business to become a worldwide satellite
service provider through the construction of additional satellites and has four
satellites under construction by SS/L. Loral anticipates that a portion of the
funds required for construction of these additional satellites will be provided
through additional borrowings or the issuance of additional equity.

Orion: Orion currently has one satellite in orbit and two satellites under
construction. The cost of the two additional satellites under construction is
fully funded.

Globalstar: On February 14, 1998, Globalstar launched its first four
satellites and on April 24, 1998 four additional satellites were launched.
Globalstar expects to begin commercial service in early 1999 following the
launch of 36 additional satellites during 1998. The remaining 12 satellites,
including eight in-orbit spares, will be launched in the first half of 1999.

In April 1998, Globalstar's budgeted expenditures for the design,
construction and deployment of the Globalstar System to commence commercial
service, including working capital, cash interest on borrowings and operating
expenses increased to approximately $2.8 billion, reflecting revised cost
estimates from Qualcomm and other increased Globalstar expenditures. In addition
to expenditures for operating costs, working capital and debt service,
Globalstar anticipates additional expenditures on system software for the
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improvement of system functionality and the addition of new features beyond
those planned for the commencement of commercial service. As of June 1, 1998,
Globalstar had raised or received commitments for approximately $2.9 billion.

In addition, Globalstar has agreed to purchase from SS/L eight additional
spare satellites at a cost estimated at $175 million. Further, in order to
accelerate the deployment of gateways around the world Globalstar has agreed to
finance approximately $80 million of the cost of up to 32 of the initial 38
gateways. In December 1997, Globalstar ordered 40,000 fixed access terminals for
$84 million. Globalstar has also agreed to finance approximately $67 million of
the cost of portable handsets. Globalstar expects to recoup the amounts financed
following the acceptance by the service providers of the gateways, fixed access
terminals and portable handsets.

SS/L is the prime contractor for the design and construction of
Globalstar's satellites. In connection therewith, SS/L and its subcontractors
have committed $353 million of vendor financing to Globalstar, of which $121
million of such vendor financing is effectively borne by the subcontractors.

Commitments and Contingencies: In connection with the Merger between Loral
Corporation and Lockheed Martin Corporation ("Lockheed Martin"), Lockheed Martin
assumed approximately $206 million of the guarantee under the Globalstar credit
agreement. The balance of $44 million of the guarantee was assumed by various
Globalstar partners, including $11.7 million by SS/L. Loral has agreed to
indemnify Lockheed Martin for its liability, if any, in excess of $150 million
under its guarantee of the Globalstar credit agreement. Globalstar is currently
financed without recourse to Loral other than the indemnification described
above.

In 1997, two in-orbit satellites built by SS/L experienced solar array
circuit failures. One of the customers has asserted that, in light of the
failures and uncertainty as to further failures, it has not accepted the
satellite. Loral believes that the customer was contractually required to accept
the satellite at completion of in-orbit testing and that risk of loss has passed
to the customer. In addition, another customer has requested that SS/L structure
an arrangement whereby a satellite under construction would be sold to another
customer. Management believes that these matters will not have a material
adverse effect on the financial condition or results of operations of Loral.

Cash Used and Provided -- Three Months Ended March 31, 1998 and 1997. Cash
used in operating activities for the three months ended March 31, 1998 was $98
million, primarily due to changes in satellite related assets and liabilities of
$112.1 million due to the progress on commercial satellite contracts and
increases in component inventory, including; an increase in contracts in process
and inventories of $109.4 million offset by a related increase in accounts
payable and accrued expenses of $59.9 million, and a decrease in customer
advances of $8.5 million and additional launch vehicle deposits of $54.1
million. This was offset by funds generated by earnings before depreciation and
amortization, taxes, minority interest and equity in net loss of affiliates of
$25.4 million. Cash used in operating activities for 1997, was $52.5 million,
primarily due to a decrease in customer advances of $75.4 million, offset by
funds generated from earnings before depreciation and amortization, taxes and
equity in net loss of affiliates of $29.1 million.

Cash used in investing activities for 1998 was $13.7 million primarily as a
result of $62.1 million of capital expenditures and $5.4 million of investments
in affiliates offset by $53.8 million of cash acquired in connection with the
Orion acquisition. Cash used in investing activities for 1997 was $628.8 million
primarily due to the purchase of Skynet and the SS/L equity interests, the
purchase of equity interests in Globalstar and capital expenditures of $46.2
million primarily for facility expansion and renovation at SS/L.

Net cash provided by financing activities for 1998 and 1997 was $110.7
million and $106.1 million respectively, primarily as a result of borrowings
under credit facilities.

Cash Used and Provided -- Year Ended December 31, 1997 and Nine Months
Ended December 31, 1996. Cash used in operating activities for the year ended
December 31, 1997 was $230.2 million, primarily due to an increase in satellite
contracts in process and inventories of $152.8 million, a decrease in customer
advances of $57.8 million due to the progress on commercial satellite contracts
and an increase in deposits of $107.7 million, offset by funds generated by
earnings before depreciation and amortization, taxes, gain on sale of K&F stock,
minority interest and equity in net loss of affiliates of $110.2 million. Cash
used in operating

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activities for the nine months ended December 31, 1996, was $3.0 million,
primarily due to increases in other current assets, offset by funds generated
from earnings before depreciation, taxes and equity in net loss of affiliates of
$17.5 million.

Cash used in investing activities for the year ended December 31, 1997 was
$1.0 billion primarily due to the purchase of Skynet and the SS/L equity
interests (see Note 3 to Loral's 1997 consolidated financial statements,
included in Loral's Annual Report on Form 10-K for the year ended December 31,
1997, which is incorporated herein by reference); the purchase of equity
interests in Globalstar and SatMex (see Note 6 to Loral's 1997 consolidated
financial statements, included in Loral's Annual Report on Form 10-K for the
year ended December 31, 1997, which is incorporated herein by reference);
capital expenditures of $255.3 million primarily for the construction of the
Telstar satellites by SS/L for Skynet and facility expansion and renovation at
SS/L; and other assets of $63.5 million, offset by the proceeds from the sale of
K&F stock. Cash used in investing activities for the nine months ended December
31, 1996 was $2.0 million due primarily to the purchase of $2.5 million
principal amount of GTL Convertible Preferreds in April 1996 and the purchase of
SS/L equity interests, offset by the sale of certain fixed assets.

Net cash provided by financing activities for the year ended December 31,
1997 and December 31, 1996 was $298.8 million and $1.2 billion, respectively,
primarily as a result of borrowings under credit facilities in 1997 and the net
proceeds from the Distribution and the net proceeds from the issuance of the
CPEOs in 1996.

YEAR 2000 ISSUE

The Company is evaluating the potential effect on its information
processing systems to determine what actions will be necessary or appropriate in
connection with the "Year 2000 Issue." The Year 2000 Issue is the result of
computer programs which were written using two digits rather than four to
signify a year (i.e., the year 1997 is denoted "97" and not "1997"). Computer
programs written using only two digits may recognize the year 2000 as the year
1900. This could result in a system failure or miscalculations causing
disruption of operations. It is not known at this time what modifications, if
any, will be required. All costs associated with any modification will be
expensed as incurred. In addition, the Company has requested, and will continue
to seek information from third-party entities on which it relies, certifying
that their computer systems will not negatively affect Loral's operations. No
assurance can be given that there will not be some unforeseen issue, in
particular, in connection with third parties' systems, that may materially
affect Loral's operations.

ACCOUNTING PRONOUNCEMENTS

Effective January 1, 1998, Loral adopted Financial Accounting Standards
Board Statement No. 130, "Reporting Comprehensive Income" ("SFAS 130"). During
the periods presented, Loral had no changes in equity from transactions or other
events and circumstances from non-owner sources. Accordingly, a statement of
comprehensive income has not been provided as comprehensive loss applicable to
common shareholders equals net loss applicable to common shareholders for all
periods presented.

In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"), and in February 1998, issued Statement No. 132, "Employers'
Disclosures About Pensions and Other Postretirement Benefits" ("SFAS 132"). SFAS
131 establishes annual and interim reporting standards for an enterprise's
business segments and related disclosures about its products, services,
geographic areas and major customers. SFAS 132 expands and standardizes the
disclosure requirements for pensions and other postretirement benefits. The
Company is required to adopt SFAS 131 and SFAS 132 in 1998, and the Company's
consolidated financial statements will reflect the appropriate disclosures.

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BUSINESS

Loral is one of the world's leading satellite communications companies,
with substantial interests in the design, manufacture and operation of
geosynchronous and low-earth-orbit satellite systems. Since its formation in
1996, Loral has assembled the building blocks essential to the creation of a
seamless, global networking capability for the information age.

Loral's principal businesses are: (i) providing GEO satellite services
through the activities of Skynet, Orion, SatMex and the proposed Europe*Star
joint venture, (ii) providing worldwide wireless telephony and data
communications through the Globalstar(TM) System, which is expected to commence
operations in early 1999, (iii) designing and manufacturing satellites and space
systems for a broad variety of customers through SS/L, and (iv) delivering
worldwide high-speed broadband data communications through CyberStar, which
plans to offer business and home users worldwide a variety of low-cost,
interactive multimedia communications services via high-speed digital signals,
which is expected to commence operations in the second half of 1998. Loral is
pursuing additional satellite-based communications service opportunities
throughout the world. For example, in August 1997, SS/L established a joint
venture with Mabuhay Philippines Satellite Corporation to provide
satellite-based services to the Philippines. Loral also owns approximately 12%
of CD Radio, Inc., a company that plans to provide digital audio radio service
to automobiles by satellite.

THE LORAL GLOBAL ALLIANCE

Following its acquisition of the Skynet business from AT&T in March 1997,
Loral has rapidly established itself through a series of subsequent acquisitions
and joint venture transactions as one of the world's leading providers of GEO
satellite-based services. GEO satellites, which orbit the Earth at fixed
positions high above the Equator, are able to provide reliable, high bandwidth
services anywhere in their coverage areas and therefore serve as the backbone
for many forms of telecommunications. In the United States and other developed
countries, customers lease GEO transponder capacity primarily for distribution
of network and cable television programming and to collect live video feeds from
breaking news and sporting events, while in the developing world a substantial
portion of GEO capacity is dedicated to long-distance telephone service as well
as television services. GEO satellites are increasingly used throughout the
world for international Internet communications, high-speed data services for
businesses through VSAT networks, and for distance learning and educational
television.

Through its acquisitions of Skynet and Orion, its 49% economic interest in
SatMex, the joint venture that recently acquired the dominant provider of
Mexican FSS, and its proposed Europe*Star joint venture with a subsidiary of
Alcatel, Loral can offer its customers an integrated portfolio of satellite
capacity that provides "one stop shopping" for local, regional and global GEO
satellite services. The Loral Global Alliance currently has seven satellites in
service providing a total of 138 C-band and 156 Ku-band 36 MHz
transponder-equivalents. The Loral Global Alliance expects to launch in the next
18 months five additional satellites, which, together with its existing
satellites, will provide a total of 226 C-band and 357 Ku-band 36MHz
transponder-equivalents, and will have a footprint covering almost all of the
world's population. Customers include the ABC and Fox television networks in the
United States, Telmex, Bancomer, Pemex and Cemex in Mexico and Viacom, Siemens,
Asea Brown Boveri and Telecom Denmark in Europe.

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Skynet

Skynet's core business is support for U.S. television network programming,
and it counts the ABC and Fox television networks as major customers. As a
result, all ABC and Fox local affiliates stations have large antennas
permanently pointed at Skynet's satellites, creating a configuration known as a
"neighborhood" that is attractive to other users requiring similar distribution
channels. Other Skynet customers include third party resellers, such as sports
syndicators, who contract with major television programmers, and distance
learning providers.

Skynet currently has two high-powered GEO satellites in orbit. Telstar 4,
which was placed in service in November 1995, is equipped with 24 C-band and 24
Ku-band transponders and provides coverage over the continental United States,
Hawaii, Alaska, Puerto Rico and the U.S. Virgin Islands. The 52-transponder
Telstar 5, built by SS/L, was successfully launched in May 1997 and placed into
service on July 1, 1997. Telstar 5 provides coverage over the continental United
States, Puerto Rico, the Caribbean and into Canada and Latin America.

Skynet plans to construct, launch and operate four additional high-powered
C- and Ku-band satellites. The addition of these satellites will substantially
increase Skynet's capacity within the United States and will further extend its
coverage area of Canada and Mexico, subject to obtaining rights from regulatory
authorities in those countries.

SatMex

In December 1997, a joint venture in which Loral holds a 65% economic
interest, completed the acquisition from the Mexican government of a 75%
interest in SatMex. SatMex, which owns and operates three GEO communications
satellites, is the dominant satellite communications company currently providing
FSS in Mexico and intends to expand its services to become a leading provider of
satellite services throughout Latin America. SatMex provides satellite
transmission capacity to broadcasting customers for network and cable television
programming, direct-to-home television service and on-site transmission of live
news reports, sporting events and other video feeds. SatMex also provides
satellite transmission capacity to telecommunications service providers for
public telephone networks in Mexico and elsewhere and corporate customers for
their private business networks with data, voice and corporate video
applications. SatMex has landing rights to provide broadcasting and
telecommunications transmission capacity in 15 nations in the region, including
the United States. SatMex's broadcasting customers include Televisa, MVS
Mutivision and Television Azteca, and its telecommunications services customers
include Telmex, Bancomer, Pemex, Cemex and the Mexican subsidiaries of Ford and
Chrysler.

SatMex believes that it has one of the largest aggregate satellite
capacities dedicated primarily to the Latin American region, with 132 36MHz
transponder-equivalents currently in operation. SatMex's three satellites
(Solidaridad 1, Solidaridad 2 and Morelos II) are in geostationary orbit at
109.2(o) WL, 113.0(o) WL and 116.8(o) WL, respectively, with aggregate
footprints covering Mexico, the southern and eastern United States, Central
America, the Caribbean and most of South America. SatMex holds 20-year
concession titles to operate in these three orbital locations at C- and Ku-band
frequencies expiring October 22, 2017. The concession titles are renewable
thereafter, subject to certain conditions, for an additional 20-year term
without additional payment. In addition, SatMex operates two satellite control
centers.

SatMex has contracts for the construction and launch of SatMex 5, the
replacement for Morelos II, which is scheduled to launch in the fourth quarter
of 1998. SatMex 5 has been designed to increase SatMex's total capacity to 144
36MHz transponder-equivalents, with a substantial increase in power and an
extension of SatMex's footprint to include substantially all of the continental
United States and the Caribbean, as well as all of Latin America, other than
certain remote regions of Brazil.

Orion

On March 20, 1998, Loral acquired Orion, a rapidly growing provider of
satellite-based communications services focused primarily on three
businesses -- private communications network services, Internet services and
video distribution and other satellite transmission services. Orion currently
owns and operates one GEO satellite and is constructing two additional GEO
satellites to be launched in the fourth quarter of 1998 and the

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second quarter of 1999. Orion provides multinational corporations with private
communications networks designed to carry high-speed data, fax, video
teleconferencing, voice and other specialized services. The Orion network
delivers high-speed data to customers in emerging markets and remote locations
which lack the necessary infrastructure to support these services. Orion also
offers high speed Internet access and transmission services to companies outside
the United States seeking to avoid "last mile" terrestrial connections and to
bypass congested regional Internet network routes. In addition, Orion provides
satellite capacity for video distribution, satellite news gathering and other
satellite services primarily to broadcasters, news organizations and
telecommunications service providers. Orion provides its services directly to
customer premises using VSATs.

Orion commenced operations of Orion 1, a high power Ku-band satellite with
34 Ku-band transponders, in January 1995, providing coverage of 34 European
countries, much of the United States and parts of Canada, Mexico and North
Africa. Orion 2, which will be a high power satellite with 38 Ku-band
transponders, will expand Orion's European coverage and extend coverage to
portions of the Commonwealth of Independent States, Latin America and the Middle
East. Orion 2 is scheduled to be launched in 1999. Orion 3, which will be a high
power satellite with 33 Ku-band transponders and 10 C-Band transponders, will
cover broad areas of the Asia Pacific region, including China, Japan, Korea,
India, Southeast Asia, Australia, New Zealand, Eastern Russia and Hawaii, is
scheduled to be launched in the fourth quarter of 1998.

Europe*Star

In February 1998, Loral announced a strategic partnership with a subsidiary
of Alcatel to jointly build and operate Europe*Star, a multiple geostationary
satellite system to be marketed as part of the Loral Global Alliance.
Europe*Star is expected to provide broadcast and telecommunications services to
Europe, Southeast Asia, the Middle East, South Africa and India.

GLOBALSTAR

Globalstar has begun to launch and is preparing to operate a worldwide, LEO
satellite-based digital telecommunications system. The Globalstar System has
launched eight of the 56 satellites (including eight in-orbit spares) that will
complete its full constellation and is scheduled to commence service in early
1999. Loral is the managing general partner of Globalstar, and has announced
plans to increase its fully diluted ownership therein from approximately 38% to
42%. See "Recent Developments -- The Globalstar Offer."

The Globalstar System has been designed to address the substantial and
growing demand for telecommunications services worldwide, particularly in
developing countries. More than three billion people today live without
residential telephone service, many of them in rural areas where the cost of
installing wireline service is prohibitively high. Moreover, even where
telephone infrastructure is available in developing countries, outdated
equipment often leads to unreliable local service and limited international
access.

The Globalstar System's worldwide coverage is designed to enable its
service providers to extend modern telecommunications services to millions of
people who currently lack basic telephone service and to enhance wireless
telecommunications in areas underserved or not served by existing or future
cellular systems, providing a telecommunications solution in parts of the world
where the build-out of terrestrial systems cannot be economically justified. The
Globalstar System has been designed to provide services at prices comparable to
today's cellular service and substantially lower than the prices announced by
Globalstar's anticipated principal competitors. Globalstar service providers
will set their own retail pricing in their assigned service territories and will
pay Globalstar approximately $0.35 to $0.55 per minute on a wholesale basis.
Globalstar's local service providers have already obtained some or all of the
national regulatory approvals they will need to obtain in 28 nations, including
China, the United States, Canada, Russia, Brazil, Indonesia, Saudi Arabia and
Ukraine.

As of June 15, 1998, each of the elements of the Globalstar System -- space
and ground segments, digital communications technology, user terminal supply,
service provider arrangements and licensing -- is on schedule to permit
Globalstar to commence commercial operations in early 1999 with a total of 44
satellites in orbit. The remaining 12 satellites, including eight in-orbit
spares, will be launched in early 1999.

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Space Segment. Globalstar launched its first four satellites on February
14, 1998 and its second group of four satellites on April 24, 1998. The first
eight Globalstar satellites have reached their final orbital positions and are
currently being used to test basic system functionality, including the system's
inter-satellite hand-off capabilities. Globalstar has an additional 16 completed
satellites on hand, 12 of which are to be launched on a Ukrainian Zenit launch
vehicle. Production is proceeding for the remaining satellites to meet scheduled
launch dates. Mission operations preparations, launch vehicle production and
dispenser development are on schedule, and all U.S. export licenses necessary
for foreign launches have been obtained. The most recent Zenit launch (which did
not involve any Globalstar satellites) ended in failure. The next scheduled
Zenit launch (of a Russian military spacecraft), originally scheduled for May
1998, has been rescheduled to July 1998, when another Zenit launch of a Russian
payload is also scheduled. Globalstar's initial launch on this vehicle has
consequently been rescheduled for August 1998, following the two scheduled
Russian launches but Globalstar does not believe that this rescheduling will
delay the Globalstar in-service date. A Zenit launch failure could substantially
delay Globalstar's launch program. A launch incident that destroys or
substantially damages the Zenit launch pad (which is the only pad from which
this rocket can be launched) would result in further delays in Zenit
availability. In the event of any Zenit failure, Globalstar would be entitled to
a free launch on Zenit, but if it elected to forego this right and launch on
another rocket, it would incur substantial additional expense. See "Risk
Factors -- Launch Risks and Vehicle Access."

Ground Segment. In preparation for its first launch, Globalstar completed
both its primary satellite operation control center ("SOCC") and a
functionally-identical back-up facility, which performed well in support of the
first two Globalstar launches. The SOCCs are fully-operational and have
demonstrated their command and control capabilities with respect to the on-orbit
Globalstar satellites, which they are currently monitoring and controlling.
Qualcomm has completed its design of the Globalstar gateway hardware, has
established the system's test-bed gateway in San Diego, and has shipped four
additional gateways to Texas, France, Australia and South Korea which helped
monitor the launch and orbital placement of Globalstar's satellites. Thirty-four
additional gateways were initially ordered by Globalstar and are currently in
production. Globalstar has resold substantially all of these gateways under
contracts with strategic partners and other service providers. Globalstar
anticipates that these production gateways will be shipped and installed on
schedule to commence commercial operations in early 1999 with a test version of
their operating software that will be upgraded prior to the commencement of
commercial operations to a more advanced version currently under development by
Qualcomm.

User Terminal Supply. Ericsson, Qualcomm, and Telital are in the process
of manufacturing approximately 300,000 handheld and fixed user terminals under
contracts totalling $353 million from Globalstar and its service providers. The
first generation of Globalstar Phones will weigh about 0.8 pounds and will be
available in attractive designs with dimensions (excluding antenna) of
approximately 7.2" x 2.5" x 1.8". Globalstar users will be able to access
terrestrial wireless systems where available through dual and tri-mode portable
and mobile user terminals. Qualcomm will offer a tri-mode handset that can
access Globalstar, AMPS (the U.S. analog cellular standard) and digital cellular
systems using CDMA technology. Ericsson's and Telital's Globalstar/GSM dual mode
phones will feature the GSM interface familiar to wireless customers in Europe
and many other areas of the world.

Service Providers. Globalstar and its partners have been seeking alliances
with service providers throughout the world and have entered into a number of
agreements in specific territories. Globalstar believes that these relationships
with in-country service providers will facilitate the granting of local
regulatory approvals -- particularly where the service provider and the
licensing authority are one and the same -- as well as provide local marketing
and technical expertise. Hyundai has recently informed Globalstar of its
intention to withdraw as a service provider in light of the financial crisis in
Asia. Globalstar is currently working with Hyundai, other strategic partners and
prospective in-country service providers to transition the Hyundai territories,
which include India, Finland and New Zealand. Globalstar's local service
providers have already obtained some or all of the national regulatory approvals
they will need to obtain in 28 nations, including China, the United States,
Canada, Russia, Brazil, Indonesia, Saudi Arabia and Ukraine.

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Licensing. In January 1995, the FCC granted authority for the
construction, launch and operation of the Globalstar System and assigned
spectrum for its user links. Later that year, the World Radio Conference 1995
allocated feeder link spectrum on an international basis for MSS systems such as
Globalstar, and in November 1996 the FCC authorized Globalstar's feeder links.
In September 1997, Globalstar applied to the FCC for authorization to launch and
operate satellite systems at 2 GHz and 40 GHz. If these applications are granted
(as to which there can be no assurance), Globalstar would be in a position to
expand its capacity.

SPACE SYSTEMS/LORAL

As one of the premier providers of satellites and other space systems, SS/L
competes principally on the basis of technical excellence, a long record of
reliable performance, competitive pricing and on-orbit delivery packages. The
Company believes that SS/L's advanced manufacturing and testing facilities and
long-term customer relationships have enabled SS/L to compete effectively in the
commercial space systems marketplace.

SS/L has a history of technical innovation that includes the first
three-axis stabilized satellites, bipropellant propulsion systems for commercial
satellites that permit significant increases in the satellites' payload and
extend the satellites' on-orbit lifetime, rechargeable nickel-hydrogen batteries
with a life span of 10 years or more, the use of advanced composites to
significantly enhance satellite performance at lighter weights and the first
communications satellite with more than ten kilowatts of power. SS/L also
created the first multi-mission geostationary satellite and was the first U.S.
company to exchange space technology with Russia's space industry, obtaining
exclusive rights outside the former Eastern bloc to an electric propulsion
subsystem that is five times as efficient as bipropellant propulsion systems.
Since 1990, SS/L has shortened delivery schedules significantly, increased
spacecraft reliability and increased spacecraft power.

SS/L's capabilities in spacecraft bus technologies are extensive, including
its efforts in composite structural design, which, with certain exceptions,
allows structural components to be manufactured of lightweight/high-strength
composite materials. SS/L was also the first to employ heat pipes in its bus to
control heat transfer in commercial satellites, thereby providing a more benign
temperature environment and increased reliability. Nickel hydrogen batteries,
when combined with SS/L's patented thermal management system, provide one of the
most efficient space batteries ever produced. A new technology currently being
developed by SS/L could result in the doubling of such efficiency within the
next three years. A new telemetry and command system employing serial interfaces
was introduced in 1997.

Active research and development projects are underway for both
communications and payload equipment and supporting bus elements. Highlights of
the payload program include the development of active microwave components,
which are among the lightest and most compact in the industry, and high power
handling state-of-the-art multiplexers and antennas that can be customized for
various customer requirements within a year of satellite delivery. Investments
in state-of-the-art computer-aided design and modeling tools have enabled SS/L
to eliminate expensive and time-consuming prototyping of most equipment, thereby
further reducing production time. SS/L's internally-funded research and
development expenditures were approximately $16.3 million and $11.2 million,
respectively, for the nine months ended December 31, 1996 and the fiscal year
ended March 31, 1996.

In March and June 1997, Loral acquired the remaining 49% of the common
stock of SS/L held by the Alliance Partners for $374 million paid in cash and
Loral securities. SS/L and three of the Alliance Partners have agreed generally
to operate as a team on satellite programs worldwide, to coordinate research and
development activities and to share technological resources. SS/L believes that
this strategic alliance has

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<PAGE> 36

enhanced its technological and manufacturing capabilities and marketing
resources and affords it access to international government and commercial
customers more effectively than its U.S.-based competitors. For example, through
the alliance, SS/L has been able to supply satellite payloads in support of
Aerospatiale's prime contract under the Eutelsat, Thaicom and Sirius programs.

CYBERSTAR

Loral is the managing general partner and principal equity owner of
CyberStar, a worldwide high-speed broadband data communications system that is
expected to commence commercial operations in the second half of 1998. CyberStar
will leverage satellites, terrestrial networks and a sophisticated network
operations center to deliver information securely and reliably at speeds of up
to 27 Mbps to multiple locations simultaneously, using an Internet protocol
multicasting technique. CyberStar plans to offer business and home users
worldwide a variety of low-cost, interactive multimedia communications services
via high speed digital signals. Initially, CyberStar intends to offer service in
the United States using leased Ku-band transponder capacity on Skynet's Telstar
5 satellite, and plans in the future to migrate its service to a worldwide
system of three GEO satellites. CyberStar's satellite-based services will
include high speed Internet access, data broadcasting, broadband
interconnection, intranet multicasting, real-time streaming and other data
services. CyberStar service will be delivered to consumers, businesses and
private networks worldwide through a network of local and regional service
providers.

AUTHORIZED ORBITAL LOCATIONS

The following table presents a brief description of the orbital locations
that the Company and its affiliates are authorized to use. All satellite systems
are subject to international frequency coordination requirements and must obtain
appropriate authority to provide service in a given territory.

FIXED SATELLITE SERVICES

<TABLE>
<CAPTION>
SATELLITE LOCATION FREQUENCY COVERAGE IN SERVICE
--------------- --------- --------------------- --------------------------------- ----------
<S> <C> <C> <C> <C> <C>
Skynet Telstar 303(1) 120(o) W.L. C-band North America F
Telstar 4 89(o) W.L. C-band, Ku-band North America F
Telstar 5(2) 97(o) W.L. C-band, Ku-band North America F
Telstar 6 93(o) W.L. C-band, Ku-band North America
Telstar 7 129(o) W.L. C-band, Ku-band North America, including Alaska
Telstar 8 77(o) W.L. C-band, Ku-band North America
Telstar 9 69(o) W.L. C-band, Ku-band North America
Orion Orion 1 37.5(o) W.L. Ku-band Europe, SE Canada, U.S. East of F
the Rockies and parts of Mexico
Orion 2(3) 12(o) W.L. Ku-band Eastern U.S., SE Canada, Europe,
CIS, Middle East, North Africa
and Latin America, S. Africa
Orion 3 139(o) E.L. C-band, Ku-band China, Japan, Korea, India,
Hawaii, Southeast Asia,
Australia, New Zealand, Eastern
Russia and Oceana
Orion A 47(o) W.L. Ku/Ka-band Americas, Europe and Africa
Orion B(3) 135(o) W.L. Ku-band North America, Hawaii, Puerto
Rico, U.S. Virgin Islands
Orion C 144(o) E.L. C-band and Ku-band China, Japan, Korea, India,
Hawaii, Southeast Asia,
Australia, New Zealand, Eastern
Russia and Oceana
SatMex Solidaridad 1 109.2(o) W.L. C-band, Ku-band Mexico and portions of Latin F
America
Solidaridad 2 113.0(o) W.L. C-band, Ku-band Mexico and portions of Latin F
America
Morelos II 116.8(o) W.L. C-band, Ku-band Mexico F
SatMex 5(4) 116.8(o) W.L. C-band, Ku-band Americas
</TABLE>

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<PAGE> 37

MOBILE SATELLITE SERVICES

<TABLE>
<CAPTION>
SATELLITE LOCATION FREQUENCY COVERAGE IN SERVICE
------------- ------------------ --------------------- -------------------------- ----------
<S> <C> <C> <C> <C> <C>
Globalstar Globalstar 56 satellites, LEO 1610 - 1621.35MHz, Global (Eight
2483.5 - 2500 - MHz, satellites
feeder links in launched)
C-band
</TABLE>

BROADBAND DATA

<TABLE>
<CAPTION>
SATELLITE LOCATION FREQUENCY/TRANSPONDERS COVERAGE IN SERVICE
------------- --------- ---------------------- --------------------------------- ----------
<S> <C> <C> <C> <C> <C>
CyberStar CyberStar 115(o) W.L. Ka-band (spot beams) North America
CyberStar 93(o) W.L. Ka-band (spot beams) North and South America(5)
CyberStar 105.5(o) E.L. Ka-band (spot beams) Asia-Pacific
Orion Orion Ka 89(o) W.L. Ka-band Americas
Orion Ka 81(o) W.L. Ka-band Americas
Orion Ka 78(o) E.L. Ka-band Russia, India, China, Europe,
Africa, CIS, Australia, Asia
Orion Ka 126.5(o) E.L. Ka-band Asia, Russia, Australia, Oceana
</TABLE>

DIRECT-TO-HOME

<TABLE>
<CAPTION>
SATELLITE LOCATION FREQUENCY COVERAGE IN SERVICE
------------- ------------------ --------------------- -------------------------- ----------
<S> <C> <C> <C> <C> <C>
R/L DBS R/L DBS 61.5(o) W.L. 11-Odd numbered Eastern US
DBS channels 1-21
R/L DBS 166(o) W.L. 11-Odd numbered Western US
DBS channels 1-21
</TABLE>

- ---------------
(1) Currently operating in inclined orbit beyond its designed life. Subject to
FCC approval, can be expected to continue to generate modest revenues for
approximately one year.

(2) This satellite is licensed pursuant to a grant of special temporary
authority that expires May 18, 1998. Prior to that date, Loral anticipates
that the FCC will grant a permanent authorization or extend the temporary
authority.

(3) These satellites are conditionally licensed by the FCC, subject to an
appropriate showing of Loral's financial capability to construct, launch and
operate the satellites.

(4) SatMex 5 is under construction and is scheduled for launch in the fourth
quarter of 1998 to replace Morelos II.

(5) The FCC license does not describe a particular coverage area.

In addition to the orbital slots listed in the table above, Loral has
applications pending at 77(o)W.L. for use of the Extended C/Ku-band frequencies,
at 81(o)W.L. for use of Ku/Extended Ku-band frequencies and at 135(o)W.L.,
115(o)W.L., 95(o)W.L. and 58(o)W.L. for use of the V-band frequency. Loral also
has International Telecommunication Union filings at 3.5(o)E.L., 11(o)E.L.,
30(o)E.L., 80(o)E.L., 105.5(o)E.L. and 135(o)E.L. for use of the V-band
frequency.

Orion has applications pending at 126(o)E.L. for use of the Ku/Extended
Ku/C and Extended C-band frequencies and at 139(o)E.L., 15(o)W.L. and 67(o)W.L.
for use of the Ka-band frequency. Globalstar also has applications pending for
an 80 satellite LEO system using the V-band frequency and for a second
generation Globalstar system comprised of 64 LEO satellites and four GEO
satellites (at 80(o)W.L., 10(o)E.L., 100(o)E.L. and 170(o)E.L.) using the 2 GHz
frequency.

EXPORT CONTROL MATTERS

Various agencies and departments of the U.S. government regulate Loral's
ability to pursue business outside the United States. Exports of space-related
products, services and technical information require U.S. government licenses.
There can be no assurance that Loral or SS/L will be able to obtain necessary
licenses or approvals, and the inability to do so, or the failure to comply with
the terms thereof when granted, could have a material adverse effect on their
respective businesses.

On February 15, 1996, a Chinese Long March rocket carrying an Intelsat
satellite built by SS/L crashed seconds after launch. Thereafter, at the request
of insurance companies concerned about underwriting future Long March launches,
the manufacturer of the Long March, China Great Wall Industries Corporation
("CGWIC"), asked SS/L employees and personnel from other interested companies to
serve on a committee

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<PAGE> 38

formed to consider whether studies of the crash made by the Chinese had
correctly identified the cause of the failure. In meetings with CGWIC, the
committee reviewed CGWIG's launch failure analysis, which consisted of a
preliminary explanation for the crash (a failed solder joint) and CGWIC's plan
for further studies it planned to make.

In May 1996, an SS/L employee transmitted a copy of the committee's
preliminary report to the members of the committee and, contrary to the
intentions of SS/L's management, to CGWIC before consulting with the U.S. State
Department. Upon becoming apprised of the facts, SS/L immediately informed the
State Department, and thereafter submitted a detailed voluntary written
disclosure to the State Department that included copies of the written materials
provided to CGWIC and descriptions of the committee's meetings with the Chinese
and of the events surrounding disclosure of the preliminary report. For the next
18 months, the Company had no notice of any adverse action being taken or
contemplated in connection with the matter.

A grand jury convened by the U.S. Attorney for the District of Columbia is
investigating whether an unlawful transfer of technology occurred in connection
with the committee's work. The Company and several of its employees have
received subpoenas from that grand jury. SS/L is not in a position to predict
the outcome of this investigation. If SS/L were to be indicted and convicted of
a criminal violation of the Arms Export Control Act, it would be subject to a
fine of $1 million for each violation, and could be debarred from certain export
privileges and, possibly, from participation in government contracts. Since many
of SS/L's satellites are built for foreign customers and/or launched on foreign
rockets, such a debarment would have a material adverse effect on SS/L's
business, which is important to the Company. Indictment for such violations
would subject SS/L to discretionary debarment from further export licenses.
Whether or not SS/L is indicted or convicted, SS/L will remain subject to the
State Department's general statutory authority to prohibit exports of satellites
and related services if it finds a violation of the Arms Export Control Act that
puts the exporter's reliability in question, and it can suspend export
privileges whenever it determines that grounds for debarment exist and that such
suspension "is reasonably necessary to protect world peace or the security or
foreign policy of the United States."

As far as SS/L can determine, no sensitive information or technology was
conveyed to the Chinese, and no secret or classified information was discussed
with, or reported to, them. SS/L believes that its employees acted openly and in
good faith and that none engaged in intentional misconduct. Accordingly, the
Company does not believe that SS/L has committed a criminal violation of the
export control laws. The Company does not expect the grand jury investigation or
its outcome to result in a material adverse effect upon its business. However,
especially in view of the early stage of the proceedings, there can be no
assurance as to those conclusions.

In May of 1997, SS/L applied for an export license for the launch of
another SS/L satellite in China, which was granted following the required
Presidential waiver in February 1998. The Company believes that the
authorizations were properly granted, and does not believe that it or any of its
officers acted improperly in obtaining them. The policy of the Bush
administration, which has been continued under President Clinton, has been to
grant such waivers routinely as being in the national interest; indeed, the
Company is unaware of any requested waiver for a Chinese satellite launch ever
having been denied. According to press reports, President Bush signed three
waivers covering nine Long March launches, and President Clinton has signed
eight waivers covering 11 Long March launches. This policy has, until recently,
also enjoyed bipartisan Congressional support.

On May 21, 1998, the House of Representatives passed a bill which, if
passed by the Senate and enacted into law, would prohibit exports of satellites
of U.S. origin to the People's Republic of China, whether or not an export
license had theretofore been obtained. The United States Senate has not acted on
this bill. If enacted into law, these provisions would prohibit further launches
of U.S.-made satellites, including those manufactured by SS/L, on the Long March
rocket. SS/L is under contract to build one satellite which is to be launched on
a Long March rocket, for which SS/L currently holds an export license. As of
May 31, 1998, SS/L has expended $63.6 million on the satellite, of which
$48.9 million has been used to acquire parts that could be applied to other
satellite programs if this program is canceled. In addition, SS/L has expended
$48.7 million in connection with the launcher. If the House bill or similar
legislation is enacted, or if SS/L's export license is revoked administratively,
the satellite's buyers may be entitled to terminate this contract for

34
<PAGE> 39

cause, and require SS/L to refund approximately $119 million as of May 31, 1998.
In such an event, SS/L would attempt to resell the satellite and launcher to
other parties and/or use some or all of the parts on other programs. Such
resales or reuse would likely result in a loss to SS/L, which could be
substantial, and the amount of which would be affected by a number of factors
beyond the control of the Company, including the date on which the program is
terminated and how long any embargo on Chinese launchers would last, as well as
market conditions for satellites and launchers. Loss of Long March availability
would disable all U.S. satellite manufacturers, including SS/L, from competing
for satellite contract awards from customers who, for political or economic
reasons, desire such launches and would benefit foreign satellite manufacturers
at the expense of the Company and other domestic manufacturers.

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<PAGE> 40

DESCRIPTION OF CAPITAL STOCK

The authorized capital of Loral consists of (i) 750 million common shares,
par value $.01 per share (the "Common Stock"), (ii) 150 million shares of
Series A Convertible Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock"), (iii) 750,000 shares of Series B Preferred Stock, par value
$.01 per share (the "Series B Preferred Stock"), to be issued upon exercise, if
any, of the rights (the "Rights") issued pursuant to the Company's Rights Plan
and attached to each certificate representing outstanding shares of Common
Stock, and (iv) 20,000,000 shares of 6% Series C Convertible Redeemable
Preferred Stock, par value $.01 per share (the "Series C Preferred Stock").

COMMON STOCK

The holders of Common Stock are entitled to voting rights. Under Bermuda
law, questions brought before a general meeting of shareholders are decided by a
majority vote of shareholders present at the meeting (or by such majority as The
Companies Act 1981 of Bermuda or the bye-laws of the company prescribe). Loral's
Bye-Laws provide that, with certain exceptions, any questions proposed for the
consideration of the shareholders will be decided by a simple majority of votes
cast by shareholders entitled to vote at the meeting, with each shareholder
present, or person holding proxies for any shareholder, entitled to one vote for
each share held.

The holders of Common Stock are entitled to receive ratably the dividends,
if any, that may be declared from time to time by the Board of Directors out of
funds legally available for such dividends. The holders of Common Stock are
entitled, under certain circumstances, to share ratably with holders of the
Series A Preferred Stock in all assets remaining after payment of liabilities
and after provision has been made for the payment of the $.01 liquidation
preference on the Series A Preferred Stock and the liquidation preference on any
other series of preferred stock of Loral. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock. All the outstanding shares of Common Stock are validly issued,
fully paid and nonassessable.

PREFERRED STOCK

Series A Preferred Stock. The Series A Preferred Stock votes together with
the Common Stock as a single class on all matters submitted to shareholders,
except that it may not vote with respect to the election of directors of Loral.
The Series A Preferred Stock is entitled to a liquidation preference of $.01 per
share and otherwise participates pro rata with the Common Stock in dividends and
distributions, subject under certain circumstances to priority rights over the
Common Stock and pro rata distribution rights with the most senior preferred
stock of Loral then outstanding in a liquidating distribution. The Series A
Preferred Stock is subject to certain antidilution adjustments, including
adjustments for stock splits and reclassifications. The Series A Preferred Stock
will be convertible into Common Stock at the option of the holder upon receipt
of certain antitrust clearance or upon a sale to a third party unaffiliated with
Lockheed Martin.

Series B Preferred Stock. The Series B Preferred Stock will, if issued, be
junior to any other series of Preferred Stock which may be authorized by Loral's
shareholders. Holders of the Rights will be entitled, subject to the occurrence
of certain events, to purchase from Loral, one one-thousandth of a share of
Series B Preferred Stock at a purchase price of $75, but before such purchase
will have no voting, conversion, redemption or preemptive rights, nor will they
have any right to receive dividends.

6% Series C Preferred Stock. The Series C Preferred Stock, with respect to
dividend rights and rights upon liquidation, winding up and dissolution, ranks
pari passu with Loral's Series A Preferred Stock and senior to or pari passu
with all other existing and future series of preferred stock of Loral and senior
to the Common Stock. The Series C Preferred Stock accrues dividends at the rate
of 6% per annum, is entitled to a liquidation preference of $50 per share, is
subject to mandatory redemption on November 1, 2006 and is convertible into
shares of Common Stock at a conversion price of $20.00 per share, subject to
adjustments under certain circumstances. Except for certain amendments to the
Series C Schedule of the Bye-Laws under which the Series C Preferred Stock was
issued and except as required by law, the holders of the Series C Preferred
Stock have no voting rights unless the Company has deferred dividend payments
for an aggregate of six quarterly

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<PAGE> 41

dividend payments, in which case the holders of the Series C Preferred Stock
have contractual rights to have the Company nominate two directors of their
choosing.

BERMUDA LAW

The Company was incorporated as an exempted company under The Companies Act
of 1981 of Bermuda (the "Act") and the rights of its shareholders are governed
by Bermuda law and its Memorandum of Association and Bye-Laws. The following is
a summary of certain provisions of Bermuda law and the Company's organizational
documents. This summary is not a comprehensive description of such laws and
documents and is qualified in its entirety by appropriate reference to Bermuda
law and to the organizational documents of the Company.

Dividends. Under Bermuda law, a company may pay such dividends as are
declared from time to time by its board of directors unless there are reasonable
grounds for believing that the company is or would, after the payment, be unable
to pay its liabilities as they become due or that the realizable value of its
assets would thereby be less than the aggregate of its liabilities and issued
share capital and share premium accounts.

Voting Rights. Under Bermuda law, questions brought before a general
meeting of shareholders are decided by a majority vote of shareholders present
at the meeting (or by such majority as the Act or the bye-laws of the company
prescribe). The Company's Bye-Laws provide that except as set forth under
"Certain Antitakeover Effects of Certain Provisions of the Bye-Laws" any
questions proposed for the consideration of the shareholders will be decided by
a simple majority of votes cast by shareholders entitled to vote at the meeting,
with each shareholder present, or person holding proxies for any shareholder,
entitled to one vote for each share held.

Rights in Liquidation. Under Bermuda law, in the event of liquidation,
dissolution or winding up of a company, after satisfaction in full of all claims
of creditors and subject to the preferential rights accorded to any series of
preferred stock, the proceeds of such liquidation, dissolution or winding up are
distributed pro rata among the holders of common stock, after satisfaction of
the obligations with respect to the preferred stock, if any.

Message of Shareholders. Under Bermuda law, a company is required to
convene an annual general meeting once in every calendar year. Bermuda law
provides that a special general meeting may be called by the board of directors
and must be called upon the request of shareholders holding not less than 10% of
such of the paid-up capital of the company carrying the right to vote. Bermuda
law also requires that shareholders be given at least five days' advance notice
of a general meeting but the accidental omission of notice to any person does
not invalidate the proceedings at a meeting.

Under Bermuda law, the number of shareholders constituting a quorum at any
general meeting of shareholders is determined by the bye-laws of a company. The
Company's Bye-Laws provide that, subject to certain exceptions, the presence in
person or by proxy of the holders of more than 50% of the voting capital stock
of the Company constitute a quorum.

Access to Books and Records and Dissemination of Information. Members of
the general public have the right to inspect the public documents of a company
available at the office of the Registrar of Companies in Bermuda. These
documents include the company's certificate of incorporation, its memorandum of
association (including its objects and powers) and any alteration to the
company's memorandum of association. The shareholders have the additional right
to inspect the bye-laws of the company, minutes of general meetings and the
company's audited financial statements, which must be presented at the annual
general meeting. The register of shareholders of a company is also open to
inspection by shareholders without charge and to members of the general public
upon the payment of a fee. A company is required to maintain its share register
in Bermuda but may, subject to the provisions of the Act, establish a branch
register outside Bermuda. A company is required to keep at its registered office
a register of its directors and officers which is open for inspection for not
less than two hours in each day by members of the public without charge. Bermuda
law does not, however, provide a general right for shareholders to inspect or
obtain copies of any other corporate records.

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<PAGE> 42

Election or Removal of Directors. Under Bermuda law and the Company's
Bye-Laws, directors are elected at the annual general meeting or elected or
appointed in such other manner as provided for in the Bye-Laws of the Company
until their successors are elected or appointed, unless they are earlier removed
or resign.

Under Bermuda law and the Bye-Laws of the Company and, subject to certain
exceptions, a director may be removed at a special general meeting of
shareholders specifically called for that purpose, provided that the director
was served with at least 14 days' notice. The director has a right to be heard
at the meeting. Any vacancy created by the removal of a director at a special
general meeting may be filled at such meeting by the election of another
director in his or her place or, in the absence of any such election, by the
Board of Directors.

Amendment of Memorandum of Association and Bye-Laws. Bermuda law provides
that the memorandum of association of a company may be amended by a resolution
passed at a general meeting of shareholders of which due notice has been given.
An amendment to the memorandum of association of a company other than an
amendment which alters or reduces a company's share capital as provided in the
Act also requires the approval of the Bermuda Minister of Finance, who may grant
or withhold approval at his discretion.

Under Bermuda law, the holders of an aggregate of no less than 20% in par
value of a company's issued share capital have the right to apply to the Bermuda
Court for an annulment of any amendment of the memorandum of association adopted
by shareholders at any general meeting, other than an amendment which alters or
reduces a company's share capital as provided in the Act. Where such an
application is made, the amendment becomes effective only to the extent that it
is confirmed by the Bermuda Court. An application for amendment of the
memorandum of association must be made within 21 days after the date on which
the resolution altering the company's memorandum is passed and may be made on
behalf of the persons entitled to make the application by one or more of their
number as they may appoint in writing for the purpose. No such application may
be made by persons voting in favor of the amendment.

Appraisal Rights and Shareholder Suits. Under Bermuda law, in the event of
an amalgamation of two Bermuda companies, a shareholder who is not satisfied
that fair value has been paid for his shares may apply to the Bermuda Court to
appraise the fair value of his shares. The amalgamation of a company with
another company requires the amalgamation agreement to be approved by the board
of directors and by a meeting of the holders of shares of the amalgamating
company of which they are directors and of the holders of each class of such
shares. Under Bermuda law, an amalgamation also requires the consent of the
Bermuda Minister of Finance, who may grant or withhold consent at his
discretion.

Class actions and derivative actions are generally not available to
shareholders under Bermuda law. The Bermuda courts, however, would ordinarily be
expected to permit a shareholder to commence an action in the name of a company
to remedy a wrong done to the company where the act complained of is alleged to
be beyond the corporate power of the company or is illegal or would result in
the violation of the company's memorandum of association or bye-laws.
Furthermore, consideration would be given by the court to acts that are alleged
to constitute a fraud against the minority shareholders or, for instance, where
an act requires the approval of a greater percentage of the Company's
shareholders than those who actually approved it.

When the affairs of a company are being conducted in a manner oppressive or
prejudicial to the interests of some part of the shareholders, one or more
shareholders may apply to the Bermuda Court for an order regulating the
company's conduct of affairs in the future or ordering the purchase of the
shares by any shareholder, by other shareholders or by the Company.

CERTAIN ANTITAKEOVER PROVISIONS

The Company's classified Board of Directors, voting provisions with respect
to certain business combinations and rights plan may have the effect of making
more difficult or discouraging an acquisition of the Company deemed undesirable
by the Board.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for Loral's Common Stock is The Bank of
New York.

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<PAGE> 43

TAXATION

This summary does not consider all the tax issues that might be relevant to
an investor or that depend on the investor's particular circumstances. It is
based on current laws and their official interpretations, all of which may be
changed, possibly with retroactive effect.

Prospective investors should consult their own advisors about the tax
consequences of an investment in the Company under the laws of the jurisdictions
in which they are subject to tax.

The discussion of United States tax considerations is based on opinion of
Willkie Farr & Gallagher, U.S. counsel to the Company, and the discussion of
Bermuda tax considerations is based on the opinion of Appleby, Spurling & Kempe,
Bermuda counsel to the Company.

UNITED STATES TAX CONSIDERATIONS

Taxation of the Company. The Company expects that a significant portion of
its worldwide income will not be subject to tax by the United States. The U.S.
Internal Revenue Service may disagree, however, and/or may promulgate
regulations that would recharacterize a substantial portion of the Company's
income as from U.S. sources and as effectively connected with a U.S. trade or
business so as to subject that income to regular U.S. Federal income and a 30%
branch profits tax. Any portion of the Company's income from sources outside the
United States, realized through Globalstar or otherwise, may be subject to
taxation by foreign countries and the extent to which these countries may
require the Company or Globalstar to pay tax or to make payments in lieu of tax
cannot be determined in advance.

The worldwide income of any of the Company's U.S. subsidiaries (such as
Skynet, Orion and SS/L) will be subject to regular U.S. Federal income taxation.
In addition, a 30% U.S. withholding tax will be imposed on dividends and
interest paid by such corporations to the Company.

Taxation of Non-U.S. Stockholders of the Company. A non-U.S. resident
alien individual, a non-U.S. corporation, a non-U.S. trust or a non-U.S. estate
will not be subject to U.S. Federal income taxation of dividends paid with
respect to Common Stock unless those payments are effectively connected with the
conduct by the stockholder of a trade or business within the United States.

In addition, such a non-U.S. stockholder will not be subject to U.S.
Federal income tax on gains realized by such stockholder on a sale or exchange
of Common Stock unless the sale of such Common Stock is attributable to an
office or fixed place of business maintained by the stockholder in the United
States or the stockholder is an individual who is present in the United States
for 183 days or more during the year of sale and who has a tax home in the
United States.

Taxation of United States Stockholders of the Company. A U.S. stockholder
that holds the Common Stock as a capital asset generally will recognize capital
gain or loss on a sale or other disposition of Common Stock (other than in
certain limited circumstances on a redemption by the Company).

Because the Company is incorporated in Bermuda, its dividend payments will
not be eligible for the dividends received deduction.

U.S. stockholders (who are not tax exempt) would be subject to a special,
adverse tax regime if the Company were (or were to become) a "passive foreign
investment company" (a "PFIC") for U.S. Federal income tax purposes. The Company
is not and, does not expect to become, a PFIC. U.S. Stockholders are urged,
however, to consult their own advisors regarding the adverse U.S. Federal income
tax consequences of owning stock of a PFIC and of making certain elections
designed to lessen those adverse consequences.

BERMUDA TAX CONSIDERATIONS

There is no Bermuda income tax, corporations or profits tax, withholding
tax, capital gains tax, capital transfer tax, or estate or stamp duty or
inheritance tax payable by the Company or by a stockholder (other than a
stockholder ordinarily resident in Bermuda) in respect of an investment in the
Common Stock.

39
<PAGE> 44

UNDERWRITING

Under the terms of and subject to the conditions contained in an
underwriting agreement (the "U.S. Underwriting Agreement"), among the Company
and each of the underwriters named below (the "U.S. Underwriters"), for whom
Lehman Brothers Inc. is acting as representative (the "Representative"), each of
the several U.S. Underwriters has agreed to purchase from the Company, and the
Company has agreed to sell to each U.S. Underwriter, the aggregate number of
shares of Common Stock set forth opposite the name of such U.S. Underwriter
below:

<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
- ------------------------------------------------------------ ----------
<S> <C>
Lehman Brothers Inc. ....................................... 4,800,000
Bear, Stearns & Co. Inc. ................................... 4,000,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 4,000,000
BancAmerica Robertson Stephens.............................. 800,000
CIBC Oppenheimer Corp....................................... 800,000
NationsBanc Montgomery Securities LLC....................... 800,000
C.E. Unterberg, Towbin ..................................... 800,000
----------
Total............................................. 16,000,000
==========
</TABLE>

Under the terms of and subject to the conditions contained in an
underwriting agreement (the "International Underwriting Agreement"), among the
Company and each of the international managers named below (the "International
Managers"), for whom Lehman Brothers International (Europe) is acting as Lead
Manager (the "Lead Manager"), each of the several International Managers has
agreed to purchase from the Company, and the Company has agreed to sell to each
International Manager, the aggregate number of shares of Common Stock set forth
opposite the name of such International Manager below:

<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Lehman Brothers International (Europe)...................... 1,200,000
Bear, Stearns International Limited......................... 1,000,000
Donaldson, Lufkin & Jenrette International.................. 1,000,000
BA Robertson Stephens International Limited................. 200,000
CIBC Wood Gundy Oppenheimer plc............................. 200,000
NationsBanc Montgomery Securities LLC....................... 200,000
C.E. Unterberg, Towbin...................................... 200,000
---------
Total............................................. 4,000,000
=========
</TABLE>

The U.S. Underwriting Agreement and the International Underwriting
Agreement (collectively, the "Underwriting Agreements") provide that the
obligations of the U.S. Underwriters and the International Managers,
respectively, to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and to certain other conditions and that if any
of the shares of Common Stock are purchased by the U.S. Underwriters pursuant to
the U.S. Underwriting Agreement or by the International Managers pursuant to the
International Underwriting Agreement, all the shares of Common Stock agreed to
be purchased by either the U.S. Underwriters or the International Managers, as
the case may be, pursuant to their respective Underwriting Agreements, must be
so purchased. The offering price and underwriting discounts and commissions for
the U.S. Offering and the International Offering are identical. The closing of
each of the U.S. Offering and the International Offering is conditioned upon the
closing of the other.

The Company has been advised by the Representatives and the Lead Managers
that the U.S. Underwriters and the International Managers propose to offer
shares of Common Stock directly to the public initially at the public offering
price set forth on the cover page of this Prospectus and to certain selected
dealers (who may include the U.S. Underwriters and International Managers) at
such public offering price less a selling concession not to exceed $.48 per
share. The selected dealers may reallow a concession not to exceed $.10 per
share. After the initial offering of the Common Stock, the offering price, the
concession to

40
<PAGE> 45

selected dealers and the reallowance to other dealers may be changed by the U.S.
Underwriters and the International Managers.

The U.S. Underwriters and the International Managers have entered into an
Agreement Among U.S. Underwriters and International Managers (the "Agreement
Among") pursuant to which each U.S. Underwriter has agreed that, as part of the
distribution of the shares of Common Stock offered in the U.S. Offering, (a) it
is not purchasing any of such shares for the account of anyone other than a U.S.
or Canadian person (as defined below) and (b) it has not offered or sold, and
will not offer, sell, resell or deliver, directly or indirectly, any of such
shares or distribute any prospectus relating to the U.S. Offering outside the
United States or Canada or to anyone other than a U.S. or Canadian Person. In
addition, pursuant to the Agreement Among, each International Manager has agreed
that, as part of the distribution of the shares of Common Stock offered in the
International Offering, (a) it is not purchasing any of such shares for the
account of any U.S. or Canadian Person and (b) it has not offered or sold, and
will not offer, sell, resell or deliver, directly or indirectly, any of such
shares or distribute any prospectus relating to the International Offering
within the United States or Canada or to any U.S. or Canadian Person. The
foregoing limitations do not apply to stabilization transactions or to certain
other transactions specified in the Underwriting Agreements and the Agreement
Among, including: (i) certain purchases and sales between the U.S. Underwriters
and the International Managers; (ii) certain offers, sales, resales, deliveries
or distributions to or through investment advisors or other persons exercising
investment discretion; (iii) purchases, offers or sales by a U.S. Underwriter
that is also acting as an International Manager or by an International Manager
that is also acting as a U.S. Underwriter; and (iv) other transactions
specifically approved by the U.S. Underwriters and International Managers. As
used herein, "U.S. or Canadian Person" means any resident or citizen of the
United States or Canada, any corporation, pension, profit sharing or other trust
or other entity organized under or governed by the laws of the United States or
Canada or any political subdivision thereof (other than the foreign branch of
any United States or Canadian Person), any estate or trust the income of which
is subject to United States or Canadian federal income taxation regardless of
the source of its income, and any United States or Canadian branch of a person
other than a United States or Canadian Person. The term "United States" means
the United States of America (including, the states thereof and the District of
Columbia) and its territories, its possessions and other areas subject to its
jurisdiction. The term "Canada" means the provinces of Canada, its territories,
its possessions and other areas subject to its jurisdiction.

Pursuant to the Agreement Among, sales may be made among the U.S.
Underwriters and the International Managers of such number of shares of Common
Stock as may be mutually agreed. The price of any shares so sold shall be the
public offering price as then in effect for Common Stock being sold by the U.S.
Underwriters and the International Managers, less an amount not greater than the
selling concession unless otherwise determined by mutual agreement. To the
extent that there are sales pursuant to the Agreement Among, the number of
shares initially available for sale by the U.S. Underwriters and the
International Managers may be more or less than the amount specified on the
cover page of this Prospectus.

Each International Manager has represented and agreed that: (i) it is not
carrying on investment business in the United Kingdom in contravention of
Section 3 of the Financial Services Act 1986; (ii) it has not offered or sold
and, prior to the date six months after the latest closing date for the issue of
the shares of Common Stock, will not offer or sell any shares of Common Stock to
persons in the United Kingdom by means of any document except to persons whose
ordinary business is to buy or sell securities or debentures, whether as
principal or agent, or otherwise in circumstances that do not constitute an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulation 1995; (iii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the shares of Common Stock in, from or
otherwise involving the United Kingdom; and (iv) it has only issued or passed
on, and will only issue or pass on, to any person in the United Kingdom, any
document received by it in connection with the issue of the Common Stock if that
person is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom
the document may otherwise lawfully be issued or passed on and that it will
procure that any purchaser from it of shares of Common Stock undertakes to
comply with the provisions of this paragraph.

41
<PAGE> 46

Purchasers of the shares of Common Stock offered pursuant to the Common
Stock Offering may be required to pay stamp taxes and other charges in
accordance with the laws and practices of the country of purchase in addition to
the offering price set forth on the cover page hereof.

Except for the Common Stock to be sold in the Offering, the Company has
agreed not to offer, sell, contract to sell or otherwise issue any shares of
Common Stock or other capital stock or securities convertible into or
exchangeable for, or any rights to acquire, Common Stock or other capital stock,
with certain exceptions, prior to the expiration of 90 days from the date of
this Prospectus without the prior written consent of Lehman Brothers on behalf
of the Representatives and the Lead Managers.

The Company has granted to the U.S. Underwriters and the International
Managers options to purchase up to an additional 2,400,000 and 600,000 shares of
Common Stock, respectively, at the initial public offering price to the public,
less the underwriting discounts and commissions shown on the cover page of this
Prospectus, solely to cover over-allotments, if any. The options may be
exercised at any time up to 30 days after the date of this Prospectus. To the
extent that the U.S. Underwriters and the International Managers exercise such
options, each of the U.S. Underwriters and the International Managers, as the
case may be, will be committed (subject to certain conditions) to purchase a
number of additional shares proportionate to such U.S. Underwriter's or
International Manager's initial commitment as indicated in the preceding tables.

The Company has agreed to indemnify the U.S. Underwriters and the
International Managers against certain liabilities, including liabilities under
the Securities Act, and to contribute to payments that the U.S. Underwriters and
the International Managers may be required to make in respect thereof.

Until the distribution of the shares of Common Stock offered hereby is
completed, rules of the Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Common Stock. As an
exception to these rules, the Representatives and the Lead Managers are
permitted to engage in certain transactions that stabilize the price of the
Common Stock. Such transactions may consist of bids or purchases for the purpose
of pegging, fixing or maintaining the price of the Common Stock.

If the Underwriters create a short position in the Common Stock in
connection with the Common Stock Offering (i.e., if they sell more shares of
Common Stock than are set forth on the cover page of this Prospectus), the
Representatives and the Lead Managers may reduce that short position by
purchasing the Common Stock in the open market after the distribution has been
completed. The Representatives and the Lead Managers may also elect to reduce
any short position by exercising all or part of the over-allotment options
described herein.

The Representatives and the Lead Managers also may impose a penalty bid on
certain Underwriters and selling group members. This means that if the
Representatives or the Lead Managers purchase Common Stock in the open market to
reduce the Underwriters' short position or to stabilize the price of the Common
Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares of Common Stock as
part of the Offering.

In general, purchases of a security for the purposes of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the applicable offering.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Representatives or the Lead Managers will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.

The Common Stock issued in the Offering has been approved for listing on
the NYSE, subject to notice of issuance.

Each of the Underwriters has from time to time provided certain investment
banking services to the Company and its affiliates for which they have received
customary fees. In addition, Lehman Brothers Inc.,

42
<PAGE> 47

Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
C.E. Unterberg, Towbin and CIBC Oppenheimer have acted as underwriters in
connection with public and private offerings of stock and debt of the company
and certain of its affiliates. A. Robert Towbin, who is a member of GTL's Board
of Directors and a member of the General Partners' Committee of Globalstar, is a
managing director of C.E. Unterberg, Towbin.

LEGAL OPINIONS

The validity of the Common Stock offered hereby will be passed upon for
Loral by Appleby, Spurling & Kempe, Hamilton, Bermuda. Certain other matters
will be passed upon for Loral by Willkie Farr & Gallagher, New York, New York,
and for the Underwriters by Cravath, Swaine & Moore, New York, New York. Mr.
Robert B. Hodes is of counsel to the law firm of Willkie Farr & Gallagher, a
Director of the Company and a member of the Executive and Audit Committees of
the Company, and owns 20,000 shares of Common Stock.

EXPERTS

The annual consolidated financial statements of Loral, SS/L and Loral's
affiliate Globalstar, and the financial statement schedule of Loral incorporated
in this Prospectus by reference from Loral's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in auditing and accounting.

The consolidated financial statements of SatMex incorporated in this
Prospectus by reference from Loral's Current Report on Form 8-K filed on January
13, 1998 have been audited by Price Waterhouse LLP, independent auditors, as
stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in auditing and accounting.

The consolidated financial statements of Orion Network Systems, Inc.
included in its Annual Report on Form 10-K for the year ended December 31, 1997
and incorporated by reference in the Form 8-K of Loral Space & Communications
Ltd. dated March 20, 1998, as amended by Forms 8-K/A dated April 27, 1998 and
June 17, 1998, which Forms 8-K and 8-K/A are incorporated herein by reference,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included in such Form 10-K and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.

43
<PAGE> 48

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents have been filed with the Commission pursuant to the
Exchange Act and are hereby incorporated by reference into this Prospectus:

(a) Loral's Annual Report on Form 10-K for the year ended December 31,
1997;

(b) Loral's Proxy Statement relating to the 1998 Annual Meeting of
Stockholders;

(d) Loral's Current Report on Form 8-K/A, filed on March 4, 1998;

(e) Loral's, Globalstar's and Orion's Quarterly Reports on Form 10-Q,
each for the quarter ended March 31, 1998;

(f) Loral's Current Report on Form 8-K, filed on April 6, 1998, as
amended by Loral's Current Reports on Form 8-K/A, filed on April
27, 1998 and June 17, 1998, respectively;

(g) Loral's Current Report on Form 8-K, filed on June 9, 1998; and

(h) Description of Capital Stock contained in Loral's Form 10, dated
April 12, 1996.

All documents filed by Loral pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Common Stock offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the date of filing such documents (provided, however, that the information
referred to in item 402(a)(8) of Regulation S-K of the Commission shall not be
deemed specifically incorporated by reference herein).

Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement as modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

Loral will provide without charge to each person, including any beneficial
owner, to whom a copy of this Prospectus has been delivered, upon the written or
oral request of any such person, a copy of any or all of the documents
incorporated by reference in this Prospectus (other than exhibits and schedules
thereto, unless such exhibits or schedules are specifically incorporated by
reference into the information that this Prospectus incorporates). Written or
oral requests for copies of these documents should be directed to Loral SpaceCom
Corporation, 600 Third Avenue, New York, New York 10016, Attention: Secretary
(Telephone (212) 697-1105).

44
<PAGE> 49

[GRAPHIC SHOWING: GLOBALSTAR ROCKET LAUNCH]
[INSIDE BACK OVER]
<PAGE> 50

======================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE REPLIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OF THE U.S. UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.

---------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. i
Forward-Looking Statements............ i
Prospectus Summary.................... 1
Risk Factors.......................... 9
Use of Proceeds....................... 17
Dividend Policy....................... 17
Price Range of Common Stock........... 17
Capitalization........................ 18
Management's Discussion and Analysis
of Results of Operations and
Financial Condition................. 19
Business.............................. 27
Description of Capital Stock.......... 36
Taxation.............................. 39
Underwriting.......................... 40
Legal Opinions........................ 43
Experts............................... 43
Incorporation of Certain Documents by
Reference........................... 44
</TABLE>

======================================================
======================================================

[LORAL SPACE LOGO]
20,000,000 SHARES

COMMON STOCK
---------------------------
PROSPECTUS
June 24, 1998
---------------------------
LEHMAN BROTHERS

BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

BANCAMERICA ROBERTSON STEPHENS
CIBC OPPENHEIMER
NATIONSBANC
MONTGOMERY SECURITIES LLC

C.E. UNTERBERG, TOWBIN

======================================================
<PAGE> 51

======================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY OF THE INTERNATIONAL MANAGERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOT ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.

---------------------------

TABLE OF CONTENTS

======================================================
======================================================

[LORAL SPACE LOGO]
20,000,000 SHARES

COMMON STOCK
---------------------------
PROSPECTUS
June 24, 1998
---------------------------
LEHMAN BROTHERS

BEAR, STEARNS INTERNATIONAL
LIMITED

DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL

BANCAMERICA ROBERTSON STEPHENS
CIBC WOOD GUNDY OPPENHEIMER
NATIONSBANC
MONTGOMERY SECURITIES LLC

C.E. UNTERBERG, TOWBIN

======================================================