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XM Needs to Launch Ground Spare Sooner Than Anticipated

XM Needs to Launch Ground Spare Sooner Than Anticipated

XM executives said while their satellites provide excellent performance, they continue to experience progressive solar array power degradation – just like other Boeing 702 satellites in-orbit. The degradation has not worsened, according to the satcaster, but it now has now put in place firm contractual arrangements to launch the spare satellite (XM-3) during the fourth quarter of 2004, and for Boeing to construct a new ground spare (XM-4) to be completed by the fourth quarter of 2005. XM has also entered into a contract with Sea Launch to provide an XM-4 launch, as needed in the future.
Under these contract arrangements, XM’s major cash outlays to launch XM-3 would not arise until the fourth quarter of 2004 and those to construct XM-4 would not occur until the first quarter of 2005. The company has recently raised sufficient funds to launch XM-3, but will need to obtain insurance reimbursement or other funds to complete construction of XM-4.
The satellite radio company has insurance claims in process relating to the power degradation trends experienced by the satellites. XM says its insurers denied the claims, asserting that the satellites are still performing above the insured levels and the power trend lines are not definitive. XM says the insurers also told the company that it failed to comply with certain policy provisions regarding material change and other matters. XM said it would will respond to the insurers and proceed to settlement discussions, arbitration or litigation (as needed) to recover the insured losses.