LightSquared, the wireless Internet company owned by Harbinger Capital Management, may have to fight for its survival twice.
The Reston, Va.-based company is already battling federal regulators who have pledged to pull the plug on its ambitious network, which has been found to interfere with global positioning systems. Now, LightSquared and Harbinger may have to gird for a fight with their own creditors, three prominent hedge funds among them.
Those creditors could declare LightSquared in default on a $1.6 billion loan due in two years at the end of the month. According to the New York Post, the loan includes covenants linked to LightSquared's deals with customers; over the past two months, the company has seen Sprint Nextel cancel its largest contract and has missed at least two payments to satellite company Inmarsat.
Among those leading the charge is Carl Icahn, the Post reports. Icahn is pushing for a debt-for-equity deal in bankruptcy that could force Harbinger and founder Philip Falcone out of LightSquared. Falcone has refused to consider bankruptcy for LightSquared, into which Harbinger has invested some $3 billion.
It is unclear how much support Icahn has for his favored path; creditors could choose to give LightSquared more time rather than declare a default.