Murray Capital Sends Letter to Loral Board of Directors.

Strongly Opposes "Sweetheart Deal" with Chairman and Insider

NEW YORK -- Murray Capital Management, Inc. ("Murray Capital") today announced that it has delivered a letter to the Board of Directors of Loral Space & Communications Inc. (NASDAQ: LORL) ("Loral"). The letter outlines Murray Capital's opposition to the Securities Purchase Agreement between Loral and MHR Fund Management LLC ("MHR").

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.

In its letter to the Board of Loral, Murray Capital states that:

* The proposed transaction is a "sweetheart deal" for MHR Fund Management and Mark Rachesky, founder of MHR and Loral's Chairman of the Board.

* Loral is providing MHR with the opportunity to conduct a "stealth take-over" of Loral at a depressed value to the detriment of other shareholders.

* The terms of the proposed deal are not attractive and, specifically, the conversion price is too low. If completed, the transaction will benefit MHR at the expense of other shareholders.

Murray Capital urges the Board of Directors of Loral to reject the MHR transaction or substantially revise it and offer it to all shareholders and explore alternate transactions, among other recommendations related to governance of Loral.

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

                                                     October 25, 2006

Board of Directors
Loral Space & Communications Inc.
600 Third Avenue
New York, NY 10016

       Re: Proposed Transaction with MHR Fund Management
           ---------------------------------------------

Dear Members of the Board:

    I am writing to express Murray Capital Management's deep concern
over recent developments at Loral. The Company's October 17, 2006
announcement proposing a $300 million convertible preferred financing
to be placed with your largest shareholder and Chairman of the Board
confirms my worst suspicions of the potential for corporate governance
issues at the Company. Based on my firm's review of that transaction
and conversations we have had with management of Loral, Murray Capital
views this transaction as a "sweetheart deal" for MHR Fund Management
and Mark Rachesky, Loral's Chairman of the Board. As Chairman of the
Board, Mark Rachesky has been in a position to obtain information and
insight on Loral not available to others. Mark Rachesky has now
determined, one year past Loral's exit from bankruptcy, that he would
like to make a $300 million investment in the Company in a priority
position to other shareholders, yet convertible at $30 per share.
While there are many aspects of this situation I don't yet understand,
I can assure you that Mark Rachesky's financial backers did not invest
with him just to buy a perpetual PIK preferred stock with a 7 1/2%
dividend.

    As your management team is aware, Murray Capital has waited
patiently for Loral to deliver on its potential after emerging from
bankruptcy in November 2005. Now that we may be on the cusp of a
bright future, we find the board entering into a transaction that will
effectively snatch a great deal of our upside away from us and deliver
it to MHR Fund Management. We feel Loral is providing MHR with the
opportunity to conduct a stealth take-over of Loral at a depressed
value to the detriment of your other shareholders. While MHR Fund
Management currently owns 35.9% of Loral's common stock, you as a
Board should know that does not give them the right to stampede over
the interests of other shareholders who collectively own much more
than they do.

    Loral's press release about the transaction states that the terms
were unanimously approved by an "independent" committee made up of
selected board members.(1) With all due respect, upon close
inspection, it would seem almost impossible that any such
"independent" committee of your eight-person board could exist.

    -- Michael B. Targoff; chief executive officer of Loral - not
       independent.

    -- Mark H. Rachesky; MHR himself - not independent.

    -- Sai Devabhaktuni; principal at MHR Fund - not independent.

    -- Hal Goldstein; principal at MHR Fund - not independent.

    -- John D. Harkey Jr.; director at Leap Wireless, where Mark
       Rachesky is Chairman of the Board and Michael Targoff is also a
       director; Mark Rachesky, individually and through MHR, is the
       largest shareholder of Leap Wireless - not independent.

    -- Dean Olmstead; now consultant to Loral - not independent.

    -- Arthur L. Simon; director at L-3 Communications, which was
       spun-off from Loral when Mr. Targoff was originally at Loral -
       questionable independence.

    -- John P. Stenbit; director at ViaSat, where Michael Targoff is
       also a director - questionable independence.

I do not question that the non-MHR directors have qualifications
suitable for Loral. When taken as a whole, however, the Board
composition is quite troubling. As you must be aware, it appears that
each and every one of your directors has financial relationships with
Loral or one another, consulting agreements or serve on other boards
together. Therefore, the statement in the second paragraph of your
press release that the agreement was "unanimously recommended by a
special committee of independent directors" is rendered meaningless.

    In discussions with Loral senior management shortly after the
announcement, I was informed that there is currently no specific
transaction agreed to for which Loral would need $300 million in
financing. If that is the case, we would like to know why the company
is selling stock to its Board Chairman at a depressed price as though
he is the only game in town, suggesting a level of distress that
doesn't exist.

    Even if there were an immediate need for financing, the terms of
the proposed deal are not attractive and, specifically, the conversion
price is too low. I simply do not understand why anyone would think it
appropriate to set a conversion price only 12% above current market,
and we think you need to address the logic used in setting the
conversion price at such a low premium. I'm sure the Board and your
investment bankers are aware that the Company's stock has been trading
well below its $970 million reorganization value set on July 25, 2005
by Judge Robert Drain who oversaw Loral's reorganization. Based on
that valuation, after you subtract out Loral's current debt level of
$126 million and $214 million of preferred stock on the balance sheet
today, Loral common stock would be worth $31.50.(2) Since the date of
this valuation there have been numerous positive developments at
Loral, as the line management has more than delivered on their
projections. Skynet has performed well and multiples achieved in
recent M&A transactions for similar fixed satellite services companies
approach 10X EBITDA, implying a significantly higher valuation on
Skynet that was placed on it at emergence from bankruptcy. Space
Systems/Loral, the manufacturing business, has been winning more than
its fair share of new satellite contracts, beating forecasts set forth
in the plan of reorganization, and the cash balance has grown.

    Adjusting Judge Drain's valuation only for the substantial cash
build up since plan confirmation results in a valuation of $36.10 per
share. Therefore, please explain the justification for setting the
conversion price on the preferred stock at a $30 price, which is also
below the reorganization value set almost 18 months ago, and which is
a meager 12% over current market levels.

    I must also admit to my concern that the current price levels of
Loral equity may have been the result of benign neglect. As I have
stated to Loral management on a number of occasions, failure to
adequately communicate with the investing community has hurt Loral's
stock price and also limits the Company's financial flexibility. I
have personally urged Loral many times to increase their transparency,
but that has not occurred. Instead, since emerging from bankruptcy
close to one year ago, Loral hasn't held a single investor call, has
not obtained coverage from any sell-side equity research firm and has
not had a shareholder meeting.(3) It is therefore no surprise that the
stock price performance has languished. The board and management team
of Loral could have made other choices about fostering relationships
in the financial community and communicating with their current and
prospective shareholders. The choice was made not to engage and I
think an explanation is in order, particularly in light of the
proposed transaction with MHR.

    I am also concerned that the very structure of the preferred
stock, which was described in your Form 8-K filed on October 17, 2006,
could in fact inhibit Loral's ability to explore future change of
control transactions, which could benefit all shareholders. In
particular, the preferred stock, which on the surface appears to limit
MHR Fund Management's voting rights to 40% of the company's voting
power, allows MHR to convert its preferred stock to full voting power
in the event a third party acquires a majority of the then outstanding
common stock. This is, in effect, a poison pill, but not one
controlled by the board, but instead controlled by MHR Fund
Management. If the preferred stock is permitted to be issued with such
terms, the Board is surrendering authority to approve a change of
control transaction to MHR Fund Management, which is inconsistent with
the Board's fiduciary duties to all shareholders.

    As a Board it is your responsibility to insist that Loral conduct
its affairs in a manner consistent with that of a public company. In
that regard, Murray Capital believes Loral should address the
following concerns:

        1. The MHR transaction must be rejected or substantially
           revised and offered to all shareholders.

        2. Alternative transactions, including the Highland Capital
           proposal, should be explored.

        3. Communicate immediately, through a press release, the
           timing of your upcoming stockholders meeting, which we were
           only informed of yesterday through our custodian.

        4. Schedule an investor call as soon as possible and be
           prepared to defend the MHR transaction.

        5. Provide complete disclosure, in an easy to follow format,
           of all management and director option grants, including
           dates on which the Board approved such grants, the number
           of shares, the exercise price and the date of the award
           agreement.

    As a significant shareholder of Loral, I would welcome any
initiative or proposal, which would inure to the benefit of all
stockholders. I cannot support, however, the MHR transaction, which is
nothing more than a blatant attempt by Loral's Chairman, Mark
Rachesky, and MHR to acquire control of Loral to the detriment of the
other shareholders. I ask that you live up to the fiduciary duties
with which you are charged and stop this transaction. I am available
to discuss the contents of this letter at any time.

                                      Very truly yours,

                                      Marti P. Murray
                                      President and Portfolio Manager
                                      Murray Capital Management, Inc.
(1) It is worth noting that the members of that "independent"
    committee were not identified in either the press release or the
    Form 8-K detailing the transaction.

(2) On July 25, 2005, Judge Robert Drain issued his bench ruling
    confirming Loral's plan of reorganization. As part of that ruling,
    Judge Drain concluded, after listening to expert testimony from
    Jefferies, Chanin, Greenhill, as well as from representatives of
    Loral management, that upon exit from bankruptcy Loral would have
    an enterprise value of $970 million. The components of that value
    were as follows:

            Space Systems/Loral           $230,000,000
            Skynet                        $440,000,000
            Excess Cash                   $150,000,000
            Other Assets                  $150,000,000
                                          ------------
                                          $970,000,000

(3) In a call with management, I was interested to learn that after
    announcing the MHR transaction and setting the conversion price on
    the preferred stock at $30 per share, Loral has now decided to
    institute quarterly investor conference calls.

About Murray Capital Management, Inc.

Murray Capital Management, Inc., a private investment firm based in New York City, was founded in 1995.