SecProbe.io

CORRESP
1
filename1.htm

     CORRESP

CARTER LEDYARD & MILBURN LLP
Counselors at Law

Steven J. Glusband

Partner

  —

Direct Dial: 212-238-8605

E-mail: glusband@clm.com

2 Wall Street

New York, NY 10005-2072

 —

Tel (212) 732-3200

Fax (212) 732-3232

701 8th Street, N.W., Suite 410

Washington, DC 20001-3893

(202) 898-1515

 —

570 Lexington Avenue

New York, NY 10022-6856

(212) 371-2720

December 3, 2007

VIA EDGAR

Mr. Larry Spirgel

Assistant Director

Division of Corporation
Finance

Securities and Exchange Commission

100 F Street N.E.

Washington D.C. 20549

Re:
Gilat
Satellite Networks Ltd.

Form 20-F for Fiscal Year Ended December 31, 2006

File No. O-2128

Dear Mr. Spirgel:

On behalf of our client, Gilat
Satellite Networks Ltd. (the “Company”), we are submitting this letter in
response to the written comments of the Staff of the Securities and Exchange Commission,
in a letter to Ms. Tal Payne, Chief Financial Officer of the Company, dated October 23,
2007 (the “Comment Letter”), with respect to the Company’s Annual Report on
Form 20-F for the fiscal year ended December 31, 2006. We have repeated the numbered
comments below and have provided a response to each comment.

1) Contractual
Obligations, Page 45

Please tell us and disclose your
material purchase commitments that may be outstanding as of the 2006 balance sheet date.
In this regards, we note your disclosure on page 6.

Response

In 2006, the Company’s primary
material purchase commitments derived from inventory’s suppliers.

The Company’s material inventory
purchase commitments are based on purchase orders, or on outstanding agreements with some
of our suppliers of inventory. As of December 31, 2006, our major outstanding inventory
purchase commitments amounted to $9.5 million, all of which were orders placed or
commitments made in the ordinary course of our business. Of these orders and commitments,
$4.4 million were from suppliers which can be considered sole or limited in number. The
above disclosure about inventory purchase commitments will be added for each most recent
balance sheet included in future filings, in a note regarding commitments and
contingencies to the annual audited consolidated financial statements.

2) Consolidated Balance
Sheet

Convertible Subordinated
Notes, Page F-4

Please tell us and add a note to
your financial statements discussing the terms of your convertible subordinate notes for $16.3
million, including the conversion terms and your basis of accounting.

Response

The Staff is informed that such
disclosure appeared in our financial statements in 2005 in Note 9a of the Company’s
financial statements. The following disclosure will be reinserted in future filings to
Note 11

“The Company pays interest on
its 4.00% convertible subordinated notes semi-annually in arrears on April 1 and October 1
of each year, beginning on April 1, 2005. The Company is committed to pay $0.4
million of the principal amount of the notes on each of April 1 and October 1, in both
2010 and 2011, and the remaining principal amount at maturity. The notes are convertible
at the option of the holder into the Company’s Ordinary shares at a conversion price
of $17.4 per Ordinary share at any time before close of business on October 1, 2012,
unless the notes have been converted pursuant to a mandatory conversion clause. Commencing
January 1, 2005, the Company may, at its option, require the conversion right to be
exercised under certain circumstances set forth in the indenture. The collateral for the
notes is a second priority security interest consisting of a floating charge on all of the
Company’s assets and a pledge of all of the shares of Spacenet Inc., a wholly owned
subsidiary of the Company.

The interest of the holders of the
notes in the collateral is subordinated to the security interest granted for the benefit
of lending banks. As of December 31, 2005 and 2006, the outstanding amount of the notes is
$16.3 million and $16.3 million, respectively.

The balance of the notes results from
debt restructurings that occurred in 2003. The debt restructurings were accounted for as
troubled debt restructuring on the basis of Combination of Types of Restructuring and on
the basis of Modification of Terms pursuant to Statement of the Financial Accounting
Standard (“SFAS”) No. 15 “Accounting by Debtors and Creditors for Troubled
Debt Restructurings”, Emerging Issues Task Force (“EITF”) Issue No. 02-4
“Debtor’s Accounting for a Modification or an Exchange of Debt Instruments in
Accordance with FASB Statement No. 15, Accounting by Debtors and Creditors for Troubled
Debt Restructurings” and SFAS No. 145, “Rescission of SFAS No. 4, 44 and 64,
Amendment of SFAS No. 13, and Technical Corrections.” Accordingly, the Company
recognized a gain in 2003. As part of the accounting for the troubled debt restructurings,
the Company accrued to the balance of the notes the remaining future interest payable
until maturity. Therefore, the outstanding balance of the notes includes both principle
and all future remaining interest payments at each reporting date. Consequently, though
the Company pays periodical interest payments, the statement of operations does not
reflect the costs of such interest payments.”

3) Note 2(c): Principles
of consolidation, Page F-13

Please disclose the
information required in paragraph 23 of FIN 46R

Response

The VIEs referred to in Note 2(c) are
the trusts deriving from the Compartel projects in Colombia. The Staff is hereby advised
that the Company has reviewed paragraph 23 of FIN 46R and is of the opinion that it is
both the primary beneficiary of the VIEs and also holds a majority voting interest
in these VIEs and as such, we believe no additional disclosure is required by paragraph 23
of FIN 46R. We respectfully refer the Staff to our response to the Staff dated November
17, 2005 in reference to our Form 20F for the Fiscal Year Ended December 31, 2004, File No
0-21218 which includes specific disclosure on these VIEs.

- 2 -

4) Note 2(z): Fair value
of financial instruments, page F-24

Please tell us and disclose the
methods and significant assumptions used in your estimate of fair value of your
convertible subordinated notes. Refer to paragraph 10 of SFAS 107.

Response

The Staff is hereby advised that the
notes are traded over the counter.

As is disclosed in Note 2z of our
financial statements, the fair value of the convertible subordinated notes was determined
based on market value (on the over the counter market) quoted as of the most recent quote
available multiplied by the number of instruments outstanding.

In our future filings we will add
disclosure to clarify that the fair value was determined based on the market value on over
the counter marker as of the most recent quote available, multiplied by the number of
instruments outstanding.

5) Note 6: Commitments
and Contingencies, Page F-28

d. Legal and tax
contingencies, page F-29

We note that your disclosure that
you “accrued approximately, $12,000 and $10,100 as of December 31, 2006 and 2005
respectively, for the expected implications of such legal and tax contingencies.”
Tell us and disclose the amount of accrual recognized for each specific contingency. In
addition, please tell us and disclose your basis for each accrual.

Response

The Staff is hereby advised that the
accruals provided by the Company of, “approximately, $12,000 and $10,100 as of
December 31, 2006 and 2005 respectively” are comprised of approximately $8.3
million and $7.1 million of tax related accruals as of December 31 2006 and 2005,
respectively, and approximately $3.7 million and $3.0 million of legal and other accruals
as of December 31, 2006 and 2005, respectively. The accruals related to tax contingencies
have been assessed by the Company’s management based on the advice of outside legal
and tax advisers. The total estimated exposure for the aforementioned tax related accruals
is approximately $14.4 million and $13.8 million as of December 31, 2006 and 2005,
respectively. These tax accruals include various tax matters such as taxes on income,
property taxes, sales and use tax and value added tax, that are in different stages of
audits, for which tax assessments have been received, or various tax exposures in which
the Company has assessed the exposure and determined that an accrual is necessary. The
estimated exposure for these legal and other related accruals is approximately $12.2
million and $9.8 million as of December 31, 2006 and 2005, respectively. The accruals
related to legal contingencies have been assessed by the Company’s management based
on the advice of outside legal advisers and are comprised of matters for which legal
proceedings have been initiated against the Company.

- 3 -

The exposures and provisions have
been assessed and provided for in accordance with SFAS 5. Liabilities related to legal
proceedings and income taxes, demands and claims are recorded when it is probable that a
liability has been incurred and the associated amount can be reasonably estimated. The
Company’s management, based on its legal counsel opinion, believes that it had
provided an adequate accrual to cover the costs to resolve the aforementioned legal
proceedings, demands and claims.

The above expanded disclosure will be
added to the Company’s future filings. Additional disclosure regarding income tax
exposures will be added in future filing in order to comply with the disclosure
requirements of FIN 48: “Accounting for Uncertainty in Income Taxes an interpretation
of FASB Statement No.109.”

Please do not hesitate to contact me
at (212) 238-8605 or Rachel Prishkolnik, General Counsel at (+972) (3) 929-3020 with
any questions or comments you may have.

Very truly yours,

/s/ Steven J. Glusband

Steven J. Glusband

SJG/db

Attachments

cc:
Ms.
Tal Payne, Chief Financial Officer, Gilat Satellite Networks Ltd.
Rachel Prishkolnik,
General Counsel, Gilat Satellite Networks Ltd.

- 4 -