LightSquared given lifeline

01 May 2012 | Kavit Majithia


Satellite spectrum company LightSquared has been granted a one week extension to covenants owed on its $1.6 billion debt that expired yesterday.

LightSquared has reportedly secured more time from debt holders to restructure its venture, after regulation permitted the company from building its ambition 4G wireless network in the US last February.

According to sources close to the situation, the one-week extension could be increased as the company fights against bankruptcy. Terms could factor on whether Phil Falcone, hedge fund manager at Harbinger Capital (a majority shareholder of LightSquared), steps down as head of the company, in addition to agreements which confirm LightSquared will not be put in to bankruptcy in the future.

Falcone has stated in the past he has the option of seeking bankruptcy protection from creditors, while retaining the value of LightSquared owned radio spectrum. Falcone’s Harbinger Capital invested $3 billion in the network but suffered a severe setback after regulators ruled the network was likely to interfere with GPS satellite navigation and aircraft safety systems. In March, Sprint Nextel seemingly put pay to LightSquared’s plans altogether, after ending a 15-year spectrum hosting deal with the company.

The Financial Times reports LightSquared has been in breach of covenants on debt since February after the FCC withdrew its support. Regulators had given conditional approval for the project in 2011, which required LightSquared to build a network that could reach over 100 million customers by 2012, reaching 260 million three years after.

Falcone predominately invested radio spectrum through his funds at Harbinger Capital that was designed to provide wholesale wireless services, in turn striking direct competition with the largest US players AT&T and Verizon.