Rumor Mill: LightSquared nearing bankruptcy

Bankruptcy has become a viable option for LightSquared as it struggles to assuage creditors while battling the FCC for permission to operate a planned LTE network.

Philip Falcone, whose Harbinger Capital Partners hedge fund is the majority investor in LightSquared, told Reuters that he is "seriously considering" filing a voluntary bankruptcy for LightSquared. He said the path would give LightSquared time to explore ways to get its nationwide wireless broadband network built out. Falcone told Reuters that even in a bankruptcy, the L-band spectrum that LightSquared holds would retain value, helping protect the company's equity stakeholders. Falcone made similar comments to the Wall Street Journal and Bloomberg.

LightSquared has been battling to stay afloat ever since the FCC in February revoked conditional permission for the company to build a wholesale LTE network due to GPS interference concerns related to the L-band spectrum that it intended to employ.

Until now, Falcone has steadfastly refused to consider bankruptcy for the beleaguered startup. However, he may have to pursue that route as a preemptive move because some of the company's hedge fund creditors, in particular hedge funds headed by Carl Icahn and David Tepper, have reportedly said they will force LightSquared into bankruptcy if a settlement is not agreed by month's end. The funds run by Icahn and Tepper are said to be owed $1.6 billion by LightSquared.

LightSquared had a net loss of $427 million during the first nine months of 2011 and has now missed multiple payments to Inmarsat under a cooperation agreement that would allow it to use some of Inmarsat's L-band spectrum in conjunction with its own for a terrestrial LTE network in the United States. LightSquared missed a $29.6 million payment on March 31, according to Inmarsat, after failing to make an earlier payment of $56.25 million that was due in February.

By day's end on April 4, neither company had said whether LightSquared had completed a separate payment that was due that day. Inmarsat said on April 3 it was "highly uncertain" that the April 4 payment would be made. Both companies acknowledged they were in discussions regarding the agreement. Wireless Week reported that LightSquared issued a statement saying it is "currently renegotiating the terms of its cooperation agreement with Inmarsat," which is slated for completion "in the next few weeks."

For more:
- see this Reuters article
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this separate Reuters article
- see this Wireless Week article
- see this separate Bloomberg article

Related articles:
LightSquared implies Dish is getting preferential treatment
What will ultimately happen to LightSquared?
LightSquared's critics battle on over GPS issues
LightSquared to FCC: 'We are not going away'
Sprint ends network-hosting deal with LightSquared, will repay $65M
LightSquared hires high-flying lawyers for potential fight with FCC