LightSquared filed for Chapter 11 bankruptcy protection after reports had indicated that the company would do so amid disagreements with its creditors.
The company, which has been backed by hedge fund Harbinger Capital Partners, had until 5 p.m. Eastern Time Monday to work out an arrangement with creditors. Apparently, those talks collapsed and LightSquared filed for protection from creditors with the U.S. Bankruptcy Court in Manhattan. It listed more than $1 billion in assets and liabilities.
Harbinger, headed by Philip Falcone, sunk more than $3 billion into LightSquared with the intention of building a wholesale LTE network. 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. LightSquared has been battling to stay afloat ever since. Falcone said in early April that he was "seriously considering" putting LightSquared into bankruptcy. LightSquared has also hinted it may sue the FCC.
Last week LightSquared received a second weeklong extension from creditors, including Carl Icahn, Andrew Beal and David Tepper. The creditors had earlier given Falcone a deadline of April 30 to revisit a waiver to avoid a default. They had also pushed for Falcone to step aside as the public face of LightSquared and for LightSquared to be overseen by an independent board that would not include Falcone. Unsecured LightSquared creditors include Boeing, which LightSquared owes $7 million, and Alcatel Lucent, which LightSquared owes $7 million.
"Today's filing was not an option the company embraced quickly or easily, but it was necessary to protect LightSquared against creditors who were looking for a quick profit, as opposed to our goal to create long-term market competition, job creation, and the promise of wireless connectivity for every American," Falcone said Monday in a statement, according to the Wall Street Journal.
LightSquared said in a statement that the bankruptcy filing will give it "breathing room" to fight the FCC's decision while continuign to move forward on its network plans.
Icahn sold $250 million in LightSquared debt holdings on May 3 for about 60 cents on the dollar, according to a May 6 report from Reuters. The Reuters article indicated that Icahn made money on the sale, as he had paid roughly 40 cents on the dollar to acquire the debt months ago.
- see this WSJ article (sub. req.)
- see this Washington Post article
- see this Bloomberg article
- see this Reuters article
- see this The Hill article
- see this CNET article
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Article updated May 15 with additional statements from Falcone and LightSquared.