Highland Capital Sends Letter to Loral Special Committee.

Strongly Opposes Contemplated Securities Purchase Agreement With Insider;

Proposes Superior Transaction

DALLAS -- Highland Capital Management, L.P. ("Highland Capital") and its affiliates today announced that it has delivered a letter to the Special Committee of the Board of Directors of Loral Space & Communications Inc. (NASDAQ: LORL) ("Loral"). The letter outlines Highland Capital's opposition to the Securities Purchase Agreement between Loral and MHR Fund Management LLC ("MHR") and offers to purchase the $300 million in convertible preferred stock to be sold in the contemplated transaction on terms that are more beneficial than those offered to Loral by MHR. Today, Highland Capital has also filed a Schedule 13D with the Securities and Exchange Commission.

Under the Securities Purchase Agreement announced by Loral on October 17, 2006, MHR or its affiliates would purchase from Loral shares of two newly created series of convertible perpetual preferred stock. Highland Capital believes that the terms of the MHR transaction were not negotiated on an arm's length basis, are not fair to or in the best interest of Loral's stockholders as a whole, and unfairly benefit MHR at the cost of Loral's other stockholders. Highland Capital also believes the following to be true:

* The convertible stock that Loral has agreed to sell to MHR was never offered to or discussed with the market at large or other significant stockholders of Loral to determine if better market terms might be available or if those stockholders might be willing to purchase such convertible stock.

* Loral allowed MHR to use its insider status to enrich itself at the expense of Loral's other stockholders. Highland Capital notes that the Non-Executive Vice Chairman of the Board of Directors of Loral is a co-founder and president of MHR Fund Management LLC.

* By accepting the MHR transaction, and apparently not insisting on a competitive marketing process, Loral's independent directors failed to meet their fiduciary duty of care and failed to protect the stockholders' best interests.

* The MHR transaction robs non-participating stockholders from the upside of a turnaround that Highland Capital believes is obvious and demonstrable at this time due to recent satellite orders among other things. In fact, Highland Capital believes that Loral is poised for recovery but that the MHR transaction steers the upside to existing controlling insiders at the expense of other public stockholders.

Highland Capital reasons that Loral could effect a substantially similar transaction to stockholders other than MHR on terms which are more advantageous to the company, and urges Loral's Board to consider alternative transactions. Highland Capital also seeks to have the Board attempt to improve the terms of the MHR transaction from Loral's perspective.

Accordingly, Highland Capital is willing to underwrite a $300 million convertible perpetual preferred stock transaction on similar terms that are more favorable to Loral, including but not limited to, a lower coupon rate and/or a higher conversion price than proposed in the MHR transaction. The proposed replacement transaction also would be open to all significant public stockholders except MHR and its affiliates. Highland Capital also is willing to backstop the $300 million by agreeing to purchase all remaining convertible preferred stock not purchased by the other public stockholders. If Highland Capital is unsuccessful in obtaining such an opportunity and effecting such a transaction, it would remain dedicated to encouraging good corporate governance principles as they apply to Loral and to protecting the value of its investment.

The following letter was sent to the Special Committee of the Board of Directors of Loral:

October 23, 2006
VIA FACSIMILE [phone]
AND FEDERAL EXPRESS

Special Committee of the Board of Directors
Loral Space & Communications Inc.
600 Third Avenue
New York, NY 10016
Attention:  Arthur Simon and John D. Harkey, Jr.

Re: Proposed Sale of Preferred Stock

Dear Members of the Special Committee of the Board of Directors:

    Highland Capital Management, L.P. and its affiliates own more than
five percent of Loral Space & Communications Inc.'s common stock, and
we want to offer to purchase the convertible preferred stock you
recently announced you are selling to MHR Fund Management LLC, but on
terms that are more beneficial to Loral.

    We were extremely disappointed to read about the Securities
Purchase Agreement for the proposed issuance of $300,000,000 of two
newly created series of convertible perpetual preferred stock to MHR.
In this transaction, it appears that, as Loral's largest stockholder,
MHR is using its insider position to enrich itself to the detriment of
Loral and other stockholders. As best as we can tell, neither Loral
nor the Special Committee of the Board of Directors made any efforts
(1) to consult other stockholders as to whether they might be
interested in purchasing securities on competitive terms or (2) to
make the proposed issuance a competitive process to ensure that the
transaction is the best possible available to Loral.

    We are surprised that so-called "independent" directors could give
unanimous recommendation to such a transaction, given that the insider
nature of the negotiation between Loral and MHR makes this proposed
investment a magnet for private and governmental scrutiny and
stockholder litigation in the post-Sarbanes Oxley age. For example,
according to CNNMoney.com, on October 18, just one day after the
Securities Purchase Agreement was signed, SEC Commissioner Cox
commented that investigations of insider trading is an increasing area
of enforcement attention. The deal struck by MHR and Loral smacks of
insider trading because of MHR's position with respect to Loral. It is
a mystery to us why you have put yourselves in the crosshairs of
possible litigation and regulatory action by failing to exercise your
fiduciary duties for the good of all stockholders and by approving
this transaction.

    We believe this proposed transaction is a disservice to all
stockholders that are not within the MHR umbrella. It reeks of
self-dealing, self-interest and is contrary to established market
principles of fairness. That you have associated yourselves with this
questionable transaction by approving it under a cloak of ignorance
would make you equally culpable. One of the precepts of the Securities
Purchase Agreement is that Loral's Board of Directors approved the MHR
transaction after it was recommended by the Special Committee of the
Board of Directors, and that this recommendation stated that the terms
of the MHR transaction are fair, from a financial point of view, to
Loral and its stockholders (other than MHR) and, taken as a whole, are
no less favorable, from a financial point of view, than Loral could
obtain from an unrelated third party. Obviously, the Special Committee
of the Board of Directors was mistaken, because the offer we make to
Loral in this letter shows that Loral can obtain terms of a similar
transaction that, taken as a whole, are more favorable, from a
financial point of view, to Loral and its stockholders.

    Here are a few reasons why we think this deal is not in the best
interest of Loral and its non-MHR stockholders:

    1. The coupon, conversion price and perpetual nature of the
       investment bear no resemblance to typical market terms or
       recent transactions. Further, Loral has offered only one
       investor (and its affiliates) the very investor-favorable terms
       of the proposed transaction, and they apparently have not been
       made available to other significant stockholders in order to
       allow them to maintain their pro-rata ownership share.

    2. The additional seat on Loral's Board of Directors to be
       provided to an MHR nominee as part of the transaction further
       consolidates control of Loral by MHR, which we believe will
       lead to future mistreatment of the remaining Loral
       stockholders. This fact is exacerbated by a provision of the
       proposed transaction that would allow for the appointment of
       two additional "independent" board seats, filled by persons
       nominated by MHR, if Loral fails to make future dividend
       payments. Indeed, this $300,000,000 deal negotiated exclusively
       with MHR appears to have been designed to shore up MHR control
       over Loral and to potentially further other non-arm's length
       dealings between MHR and Loral.

    3. Loral has apparently negotiated this MHR-favorable transaction
       without consulting with other Loral stockholders or even with
       other potential, unrelated investors who might reasonably be
       willing to purchase the convertible preferred stock on better
       terms.

    What we have seen in the referenced Securities Purchase Agreement
is an indictment of many of the problems of the American financial
system. Should an investor holding a plurality of the shares improve
its position to a majority of the shares without consultation and
consent of the other stockholders? Are the fiduciary duties of
independent directors so pliable that they can be convinced that a
deal conceived and approved by the minority in private is the best for
all public stockholders? Should independent directors hide behind
Delaware law to protect them when making "best business judgment at
the time" decisions when the open market is not canvassed?

    We suggest that the answer to each of the above questions is
unquestionably "no."

    In light of this troubling situation regarding a unilateral
investment in Loral by MHR, we propose to offer Loral the same
$300,000,000 investment under improved economic terms. These improved
economic terms include, but are not limited to, a lower coupon or
higher conversion price, or both. In addition, we would make the
investment open to all other significant Loral stockholders, but would
specifically exclude MHR and its affiliates. The limit on MHR's
participation in our proposal is wholly due to its demonstrated
inability and/or unwillingness to consider the interests of all
stockholders. Finally, Highland would backstop any remaining
investment not absorbed by other stockholders.

    One of the conditions to closing the sale of the convertible
preferred stock under the terms of the Securities Purchase Agreement
is that the Special Committee of the Board of Directors deliver its
recommendation of the transaction to Loral's Board of Directors. Since
this provision was included in the executed Securities Purchase
Agreement, we assume (and we certainly hope) that this is a meaningful
condition, so that the Special Committee of the Board of Directors
will not deliver its recommendation to the full Board of Directors if
the Special Committee no longer believes that the terms of the MHR
transaction are superior or equal to the terms that could be obtained
from a party other than MHR. We implore the Special Committee to
withhold the delivery of its final recommendation to the full Board of
Directors, given the superior offer made in this letter.

    Given the expedited nature of MHR's intention to close the
transactions described in the Securities Purchase Agreement, we demand
an immediate response to the proposal made in this letter.

    Please contact the undersigned immediately to further discuss the
offer made by Highland in this letter.

Regards,

/s/ J. Kevin Ciavarra
Highland Capital Management, L.P.
Officer of its General Partner and General Counsel

About Highland Capital Management, L.P.

Based in Dallas, Texas with offices in New York and London, Highland Capital Management, L.P. is an SEC-registered investment adviser specializing in credit and alternative investment investing. Highland Capital currently manages over $30 billion in leveraged loans, high yield bonds, structured products and other assets for banks, insurance companies, pension plans, foundations, and high net worth individuals.