Report: Creditors want to push Falcone out as face of LightSquared

LightSquared's creditors have reportedly given the company a one-week extension so that it can avoid a default on its debt, but according to a report in the Wall Street Journal, the bondholders are pushing Philip Falcone, the head of hedge fund Harbinger Capital partners, out of his role as the public face of LightSquared.

The report, as well as reports from Bloomberg and Reuters, said that the creditors, including billionaire investor Carl Icahn and hedge fund manager David Tepper, want Falcone to step aside as a condition of avoiding default on $1.6 billion in debt. The creditors had given Falcone a deadline of Monday morning to revisit a waiver that would have triggered a default on LightSquared, into which Harbinger has invested more than $3 billion. All of the reports cited unnamed sources familiar with the matter.

A Harbinger spokesman did not immediately respond to a request for comment. "I've only been on the board for two months and it was always supposed to be temporary," Falcone wrote Sunday in an email to the Journal. "I am not an officer nor did I ever plan to be one. The board and the company need telecom and industry veterans, not hedge-fund managers."

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 earlier this month that he is "seriously considering" putting LightSquared into bankruptcy. LightSquared has also hinted it may sue the FCC.

According to the Journal, under the deal Falcone wouldn't be allowed to serve as an officer of LightSquared and would eventually step down as a LightSquared director. The report said the creditors want LightSquared to be overseen by an independent board that doesn't include Falcone.

The short-term extension is designed to give Falcone and LightSquared's creditors a chance to negotiate a longer extension of between 18 months and two years, according to the Journal.

Sanjiv Ahuja said in late February he would step down as the CEO of LightSquared. Two other LightSquared executives, Doug Smith and Marc Montagner, were named as the company's interim co-chief operating officers while LightSquared searches for a new CEO.

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

Related Articles:
LightSquared to pay Inmarsat $56.3M, delays further payments until 2014
Lawmakers press FCC to give LightSquared new spectrum
Rumor Mill: LightSquared nearing bankruptcy
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'

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