New York’s Loral Space & Communications [LOR] is acknowledging for the first time that claims against it by France-based Alcatel Space could have a “material” impact on its financial picture.

The change follows an arbitration panel’s ruling late last month that Loral violated a partnership agreement with its former satellite-manufacturing partner. The tribunal assigned to address the claims and counterclaims found that Loral breached the alliance agreement between the two companies by failing to share information.

Now, the tribunal is requesting further submissions by the parties involved and scheduling hearings to be held this May to determine if any of the breaches caused Alcatel to suffer injury that is sufficient to warrant damage payments from Loral.

If the tribunal finds that Alcatel sustained damages, there could be a “material adverse effect” on Loral’s consolidated financial position and operating results, Loral officials reported in an 8-K filing with the Securities and Exchange Commission.

Alcatel is seeking $350 million in damages from Loral. Industry observers questioned whether anything close to that level of damages could be justified.

William Kidd, a satellite analyst with Lehman Brothers, was skeptical that Alcatel incurred “significant harm.”

In a Feb. 3 research note to his clients, Kidd wrote that Alcatel’s claim that Loral did not share information is unlikely to warrant a “significant award” for damages.

However, if the tribunal somehow found adequate reason to slap Loral with hundreds of millions of dollars in damages, Kidd said the financially struggling company’s probability of bankruptcy would rise “dramatically.”

“Importantly, Loral’s new disclaimer regarding the dispute shows the ruling is quite negative,” Kidd wrote. Loral previously explained in its financial documents with the SEC that the dispute likely would have no material adverse effect on the company.

Maury J. Mechanick, attorney with the Washington office of White & Case LLP said the arbitration tribunal’s finding that the partnership agreement was breached by Loral does not mean in and of itself that Alcatel suffered any “actual damages.”

“Resolution of that issue will depend upon the tribunal’s assessment of factual submissions and legal arguments yet to be made by both Alcatel and Loral on the damages question and, as such, it is not possible to make any predication as to the outcome at this time,” Mechanick said. –Paul Dykewicz

(William Kidd, Lehman Brothers, 212/526-4849; Maury Mechanick, White & Case, 202/626-3635)