LightSquared Inc., the wireless-network company backed by billionaire Philip Falcone, received a weeklong extension from its creditors, helping stave off a default, according to a person with knowledge of the matter.
The creditors have requested that Falcone step aside as part an agreement, though the negotiations are still under way, said the person, who asked to remain anonymous because the discussions are private. Bondholders, including Carl Icahn, Andrew Beal and David Tepper, had given Falcone a deadline of today to revisit a waiver that avoided triggering a technical default on its debt.
Falcone’s original plan for LightSquared depended on winning the U.S. Federal Communications Commission’s approval to convert airwaves designated for satellite service to spectrum for land-based radio towers. The Reston, Virginia-based company invested $4 billion in airwaves and reached deals with more than 30 partners, including Best Buy Co.
LightSquared hit a roadblock in February when the FCC said it would withdraw preliminary approval for the company’s network after government tests found that the signals would interfere with global-positioning systems. The decision followed a yearlong lobbying fight between LightSquared and GPS users and providers. The Coalition to Save Our GPS, a group formed to opposed LightSquared’s plans, included package shippers FedEx Corp. and United Parcel Service Inc., GPS-equipment maker Garmin Ltd. and farm-gear manufacturer Deere & Co.
Falcone said earlier this year that he was considering bankruptcy for LightSquared, though he would rather get the government to swap his spectrum for that controlled by the U.S. Department of Defense.
Mike Sitrick, a spokesman for Falcone, declined to comment. Icahn didn’t immediately respond to a request seeking comment. The Wall Street Journal reported earlier on the weeklong extension.
On March 16, Sprint Nextel Corp. handed LightSquared one of its biggest setbacks when it ended an 11-year agreement to build, operate and share the network. LightSquared paid Sprint $310 million in advance, and Sprint said in a securities filing Feb. 27 that it would return $65 million of the payments it has received from LightSquared.
LightSquared had originally agreed to pay Overland Park, Kansas-based Sprint $9 billion for the network duties and issue an additional $4.5 billion in service credits. The deal hinged on approval from the FCC.
On Feb. 28, soon after the FCC decision, Chief Executive Officer Sanjiv Ahuja resigned. The company appointed Falcone to the board as it began a search for a new CEO. LightSquared also cut 45 percent of its 330-member staff to preserve cash.
The company said the government tests were rigged and the results were bogus. LightSquared has vowed to work on a solution to the interference issue. On March 13, the company said it hired litigators Theodore Olson and Eugene Scalia of Gibson Dunn & Crutcher LLP in preparation for a possible legal battle with U.S. regulators.
After skipping two payments to Inmarsat Plc in February and March for what it called incomplete work, LightSquared made a $56.3 million payment to the British satellite partner earlier this month. The payment gave LightSquared a two-year extension on the next payment deadline.