May 7 (Bloomberg) -- LightSquared Inc., the wireless-network company backed by billionaire Philip Falcone, received a second weeklong extension from creditors, delaying a potential bankruptcy, a person with knowledge of the matter said.
The move gives LightSquared more time to negotiate before having to revisit a waiver that is keeping its debt from going into default. Before the original April 30 deadline, Falcone conditionally agreed to a request by creditors that he step down from the Reston, Virginia-based company’s board and executive committee, according to people familiar with the talks who weren’t authorized to speak publicly.
Falcone, who effectively has been running LightSquared since February, has to decide whether to hand over part of his stake in the company to creditors. If he can’t come to terms, LightSquared faces bankruptcy.
Billionaire Carl Icahn, one of LightSquared’s creditors, has sold his $250 million in debt holdings, Reuters reported yesterday. Icahn received about 60 cents on the dollar for the holdings on May 3, after originally paying about 40 cents on the dollar months earlier, Reuters said, citing unnamed sources.
Icahn and Falcone didn’t immediately respond to requests for comment.
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 company invested $4 billion in airwaves and forged 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.
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, LightSquared 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 in April. The payment gave LightSquared a two-year extension on the next payment deadline.
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