updated 08:30 pm EDT, Wed April 4, 2012
Creditors getting antsy about firm's future
Troubled LTE telecom company LightSquared may default on a $1.6 billion loan and reported a net loss of $427 million for the first three quarters of 2011, forcing founder Philip Falcone to consider a "voluntary bankruptcy" to stave off creditors, Reuters reports. The move would buy time for Falcone and his hedge fund Harbinger Capital Partners to find ways to salvage the company, which has hit government resistance to its plan to create a satellite "4G" network.
The idea, which Falcone told an interview earlier today he is "seriously considering," would be a reversal of his previous position. The FCC withdrew a waiver needed for LightSquared to begin building out its value-priced LTE satellite network after discovering that the network would interfere with critical GPS satellite systems used in aviation, agriculture, emergency services and the military. LightSquared has consistently maintained that the interference in frequencies between the bandwidth it owns rights to and the GPS systems was due to GPS systems using a wider portion of spectrum than they are actually allowed.
Creditors are said to have told Falcone he has until the end of this month to put together a deal, or they will move to force the company into bankruptcy. Falcone, who rose to prominence by betting heavily against the housing bubble shortly before it collapsed, has sunk more than half of his hedge fund's $4 billion in LightSquared.
Following the FCC ruling, Sprint -- LightSquared's main customer -- bailed out of a deal to help build the network. The Harbinger fund lost nearly half its value because of an early LightSquared writedown in 2011, and lost another 30 percent over another writedown last month.
Falcone believes that once the company finds a solution to the interference issue, the FCC will relent and reissue the waivers, raising the value of the spectrum bandwidth LightSquared owns. Even without a fix, the spectrum rights have a value unto themselves for cellular carriers, GPS makers and others.