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May 7 2012 | 3:37pm ET
LightSquared and its lenders continued to talk about a long-term deal after the latter gave the Harbinger Capital Management-backed wireless Internet venture another one-week extension on a debt covenant waiver.
The two sides are still trying to hammer out an agreement that would avoid either a default declaration against the company or a bankruptcy filing. Harbinger chief Philip Falcone is said to favor the latter, while creditors are said to be eager to avoid it. Debt holders gave LightSquared its first extension on April 30; such extensions became necessary when the Federal Communications Commission revoked LightSquared's preliminary waiver earlier this year, a move that put LightSquared in breach of $1.6 billion in debt covenants.
The two sides are still at odds over a so-called "bad boy" clause that would make Falcone personally responsible for the debt if he was found to have influenced an eventual bankruptcy filing. But Falcone is balking at accepting both that requirement and one that would force him to step down from LightSquared's board.
Creditors are pushing other "bankruptcy-remote" clauses in a long-term deal, as well as a possible restructuring that would give them equity stakes in the company. Currently, Harbinger owns about 96% of LightSquared's stock.