LightSquared bankruptcy seen imminent: sources

RESTON, Va., Mon May 14, 2012 – LightSquared Inc., the startup telecommunications company bankrolled by hedge fund manager Philip Falcone, is expected to file for bankruptcy protection in the next hours, sources familiar with the matter said.

Falcone has until Monday at 5 p.m. EDT to reach an agreement or face a default on a $1.6 billion loan, sources said. While the parties still have a few hours left to negotiate, the sources suggested that a last minute deal is highly unlikely and that the filing is imminent.

A representative for Falcone was not available for comment.

Creditors have been negotiating to restructure LightSquared’s 96 percent ownership by Falcone’s Harbinger Capital Partners.

“The bondholders are asking for conditions they know Harbinger and Phil cannot agree to,” a source close to the situation said on Sunday.

Falcone, once one of the hedge fund industry’s biggest stars, had already been given a reprieve twice before when debt holders extended the original April 30 deadline two times.

LightSquared has been fighting for its life since February when the U.S. Federal Communications Commission said it would revoke permission provisionally granted to LightSquared to build a high-speed wireless network. Tests found that LightSquared’s systems could interfere with the Global Positioning System, critical to the military, commercial aviation, and many other industries including agriculture.

Falcone, who once managed around $26 billion for wealthy investors, has faced off against other prominent hedge fund managers who had bought the company’s debt. LightSquared creditors have included hedge fund manager David Tepper, billionaire investor Carl Icahn and hedge funds including Fortress Investment Group, Knighthead Capital Management, Redwood Capital Management and investment firm Capital Research and Management Co.

Icahn recently sold his $250 million position in the company for a profit, according to sources.

LightSquared loses main business network partner Sprint

WASHINGTON, Fri Mar 16, 2012 – Hedge fund manager Philip Falcone’s LightSquared has lost its main business partner, Sprint Nextel Corp., which returned $65 million in payments to his telecommunications startup.

Sprint said on Friday it will exercise its right to scuttle the $9 billion agreement that would have allowed LightSquared to use a network Sprint is building to sell its own high-speed wireless service.

The development, which was expected, is another setback for LightSquared, but it does provide the company more cash as it fights for survival.

Sprint had the right to back out of the deal if LightSquared failed to get regulatory approval. Regulators said LightSquared’s network would interfere with the Global Positioning System used by airlines, the military and others.

Last month, the U.S. Federal Communications Commission proposed to indefinitely suspend LightSquared’s authority to use its satellite spectrum for cellular use.

Since then, the company said it would lay off nearly half of its 330 employees. Sanjay Ahuja, a telecommunications industry veteran, also stepped down as chief executive just two weeks after the major blow from regulators.

“We remain open to considering future spectrum hosting agreements with LightSquared, should they resolve these interference issues, as well as other interested spectrum holders,” Sprint said in a statement.