By Matt Siegel
SYDNEY, April 8 (Reuters) - Embattled Australian satellite firm NewSat said on Wednesday a major lender for its upcoming $650 million satellite launch had withdrawn support for the project, forcing it to look for alternative funding to prevent the project from collapsing.
Funding for the project to launch Australia's only privately owned commercial satellite was suspended last year after financial irregularities were uncovered and Melbourne-based NewSat needed waivers from its backers to get new loan instalments. But the aerospace firm failed to secure the support of Europe's COFACE Lender Group.
"The result of the COFACE position is that the COFACE Lender Group will not presently advance further funds," NewSat said in a statement.
"The other lenders have stated that they also will not advance further funds so long as the COFACE Lender Group does not advance funds, or until a substitute funding source emerges that is acceptable to the other lenders."
Some $62 million is still outstanding on the loan from COFACE, NewSat said, while approximately $160 million from the other backers remained frozen.
A collapse of the deal to launch the satellite, Jabiru-1, would be a blow for the U.S. Export Import Bank, the other primary lender funding the Lockheed Martin-built satellite.
Ex-Im Bank is fighting for survival over criticism that the 80-year-old institution, which has invested heavily in satellites in recent years, favours corporate giants over small businesses.
The funding shortfall has already stopped NewSat from paying its launch provider, France's Arianespace, which in turn led it to issue the Australian communications firm a termination notice with a 30-day deadline.
Although Lockheed has not stopped building Jabiru-1, NewSat said that the funding issues could lead the U.S. aerospace giant to terminate its satellite manufacturing agreement, leading to the collapse of the project.
NewSat said that is remained in talks with its lending group about bridging the funding shortfall, and would pursue alternative lending and capital sources.
The firm has recently hired U.S. investment bank Peter J Solomon Company to assist with financing, it said.
Shares in NewSat have been suspended since March 25 having lost more than 70 percent of their value in the past year.
(Editing by Muralikumar Anantharaman)