LightSquared Creditors Want Anti-Bankruptcy Provisions, Falcone Out

Apr 30 2012 | 2:37pm ET

LightSquared has many problems, but creditors of the wireless Internet venture backed by Harbinger Capital Management are focused on one: Harbinger founder Philip Falcone.

LightSquared and its lenders are discussing a one-week extension under which the latter would agree not to make a default declaration against the company. But those creditors, believed to include Carl Icahn and hedge fund Appaloosa Management, want Falcone, who has increasingly become the face of the embattled company, to step aside.

Under the tentative deal, he would, eventually: The agreement calls for Falcone to be barred from serving as an officer of LightSquared and for his eventual exit from its board of directors. Falcone appears to be open to those requirements; he told The Wall Street Journal yesterday, "I've only been on the board for two months and it was always supposed to be temporary. I am not an officer nor did I ever plan to be one."

"The board and the company need telecom and industry veterans, not hedge fund managers," he added.

LightSquared has been battling for survival since the Federal Communications Commission said earlier this year that it would not approve the company's planned network due to concerns about interference with global positioning systems.

LightSquared's board was mulling the short-term deal—which would give it time to hammer out an 18- to 24-month extension after today's deadline—last night. And while Falcone is open to stepping aside, other points remain contentious.

To begin with, creditors want to keep Harbinger from putting LightSquared into Chapter 11 bankruptcy protection, which would prevent them from declaring it in default and would allow Harbinger and Falcone time to turn the company around. Two options for making the company "bankruptcy-remote"—a so-called "bad boy" clause that would make Falcone personally liable for LightSquared's $1.6 billion in debt if he pushes the company into bankruptcy, and a "golden chair" provision that would give a director or group of directors veto power over a bankruptcy filing—have not yet been accepted by Falcone or LightSquared. Both of those provisions would depend on a longer-term deal being reached during the week-long extension.

If a deal cannot be reached, a bankruptcy filing is likely. Falcone has previously called such a move, which he initially opposed, the "best way" for Harbinger to maintain control of LightSquared.


In Depth

Q&A: Quad Advisors’ Borish Is Looking For Real Traders, Not Index Huggers

Aug 20 2014 | 1:43pm ET

Peter Borish, who served as founding partner and director of research at Tudor Investment...

Lifestyle

Nicky Hilton To Wed James Rothschild

Aug 20 2014 | 5:23am ET

When it comes to husband-material, socialite Nicky Hilton is sticking with finance...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

FINalternatives Most Popular

Editor's Note

 

Futures Magazine

PREVIEW July/August 2014 Cover

Inside Futures' 500th Issue

The July/August 2014 issue is our largest in years—filled with the best trading strategies and stories from 43 years of being the primary publication for commodity, stock, options and forex traders.

The Alpha Pages

TAP July/August 2014 Cover

Real talk on alternative investments, business & finance

The Alpha Pages Editor's Note