LightSquared has until 5 p.m. ET today to work out a deal with lenders that would keep it from being forced into bankruptcy, but reports say the company is drawing up its own plans for voluntary Chapter 11 bankruptcy protection in case those negotiations falter.
Reuters and the Wall Street Journal both reported on Sunday that hedge-fund manager Philip Falcone, whose Harbinger Capital Partners owns 96 percent of LightSquared, is at odds with lenders regarding his future role and how best to cede Harbinger's ownership stakes in LightSquared to its creditors. The $3.8 billion hedge fund has sunk 60 percent of its money into LightSquared.
Reuters said lenders also want LightSquared to be overseen by an independent board and have sought to hold Falcone personally liable for a future bankruptcy filing under certain circumstances
Lenders agreed to twice extend deadline waivers to LightSquared as it struggled to avoid defaulting on a $1.6 billion loan, terms of which the company has already violated. The first date that the loan could have been declared in default was April 30, which would have forced LightSquared into immediate bankruptcy.
Falcone has said previously that he would consider Chapter 11 bankruptcy protection for LightSquared, which would give him time, perhaps 18 months, to craft a reorganization plan for the telecom startup. Lenders, however, would have a say in any plan Falcone submitted to the court and could block his efforts at reorganization.
The FCC in February revoked a conditional waiver for LightSquared to build a wholesale LTE network due to GPS interference concerns related to the 1.6 GHz L-band spectrum that LightSquared intended to employ. The telecom startup has been battling to stay afloat ever since.
According to Reuters, LightSquared's creditors have included hedge fund manager David Tepper and hedge funds including Fortress Investment Group, Knighthead Capital Management, Redwood Capital Management and investment firm Capital Research and Management.
One potential twist to the LightSquared saga involves LightSquared investor Carl Icahn and Dish Network Chairman Charlie Ergen, who resigned his role as CEO last summer to focus on Dish's efforts to use 2 GHz S-band spectrum for a terrestrial LTE-Advanced network. According to several reports, Icahn sold $250 million in LightSquared debt holdings earlier this month to Sound Point Capital, a three-year-old investment firm headed by Stephen Ketchum, whose client list when he previously worked as an investment banker included Dish.
If accurate, rumors of Dish's possible involvement in the LightSquared debt are particularly curious given Ergen's recent comments regarding the satellite spectrum that Dish wants to use to deploy a terrestrial LTE-Advanced network. At a speaking engagement last month at the University of Colorado-Boulder, Ergen seemed to imply that the S-band satellite spectrum Dish holds is preferable to LightSquared's L-band spectrum.
"We did our homework, in the sense that we knew there'd be some interference issues," Ergen said, adding the company "went after frequencies that are pretty clean." He noted the GPS industry, which opposes LightSquared's efforts to use L-band satellite spectrum for an LTE network, supports Dish's plan to use S-band spectrum.
During Dish's first-quarter 2012 earnings conference call, Ergen noted that the satellite-TV provider holds 40 MHz of S-band satellite spectrum and 6 MHz of 700 MHz spectrum, which he said is enough for the company to enter the broadband wireless business.
"Hopefully, there'll be new spectrum coming on the market. Hopefully, there'll be other ways to make spectrum more efficient," Ergen said, according to a Seeking Alpha transcript.
- see the Reuters article
- see this Wall Street Journal article (sub. req.)
- see this Denver Post article and blog
Dish's Ergen: We have enough spectrum for wireless biz
LightSquared: Icahn sells holdings, company keeps battling default
Report: Creditors want to push Falcone out as face of LightSquared
LightSquared to pay Inmarsat $56.3M, delays further payments until 2014
Lawmakers press FCC to give LightSquared new spectrum
Rumor Mill: LightSquared nearing bankruptcy