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Icahn Said to Purchase LightSquared Debt in Bet on Collapse

Billionaire Carl Icahn has purchased debt from Philip Falcone’s LightSquared Inc.’s bondholders as the satellite-broadband-service provider struggles to start service, two people familiar with the transaction said.

Icahn, along with investors Andrew Beal and David Tepper purchased $300 million in LightSquared debt sold by Farallon Capital Management LLC. last month, said the people, who declined to be named because they weren’t authorized to speak. The move may give Icahn control of LightSquared’s radio spectrum for less than Falcone originally paid.

As the Reston, Virginia-based company seeks approval to convert satellite airwaves to mobile-phone spectrum, interference with global-positioning devices threatens to kill the process. In a letter last week regulators said no further tests were needed after an investigation found that LightSquared disrupts GPS receivers. The company has disputed the findings.

With the approval process in jeopardy, network investment partner Sprint Nextel Corp. said on Jan. 5 that it was postponing its venture with closely-held LightSquared. Sprint had agreed to build the company’s so-called fourth-generation long-term evolution network.

Terry Neal, a LightSquared spokesman, declined to comment. Harbinger Group Inc. and Beal Financial Corp. representatives Lew Phelps and Jim Chambless declined to discuss the matter. Icahn and Tepper, president of Appaloosa Management LP, weren’t immediately available. Harbinger is Falcone’s hedge fund and the primary investor in LightSquared.

LightSquared has limited time and may need more money by April, Jonathan Chaplin, an analyst with Credit Suisse Group AG, said last month. Falcone originally paid $4 billion for the radio spectrum.

Icahn’s investment was first reported today by The Wall Street Journal.

LightSquared has “enough money to last us several quarters,” Neal said yesterday.

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