The Reston-based company’s biggest investor, Philip Falcone of Harbinger Capital, said that the firm filed for bankruptcy to buy time. Its bondholders had set a deadline of late Monday to restructure the firm’s debt. But those talks crumbled as the creditors, who lost faith in a plan that no longer had government support, called for Falcone to step aside.
“Today’s filing was not an option the company embraced quickly or easily, but it was necessary to protect LightSquared against creditors who were looking for a quick profit, as opposed to our goal to create long-term market competition, job creation, and the promise of wireless connectivity for every American,” Falcone said in a statement.
A Harbinger spokesman said Falcone would remain in charge of Harbinger Capital and on the board of LightSquared.
Falcone, once one of the financial industry’s brightest stars, has said his hedge fund poured $4 billion into the firm and had pledged to put in an additional $10 billion to deploy its cellular network.
According to the filing, LightSquared employed 168 people in the U.S. and Canada and generated about $30 million in annual revenue from businesses who leased its airwaves. As of Feb. 29, the company said it had about $4.5 billion in assets and $2.3 billion in liabilities.
Falcone said that the Chapter 11 filing will give the firm “additional runway” time to resolve concerns by regulators.
“I remain steadfast in my belief that a path forward exists that will satisfy and benefit all constituencies,” Falcone said.
Creditors lost faith in the venture after the Federal Communications Commission withdrew support of the plan in February and partner Sprint Nextel severed its business ties soon after.
The reversal of fortunes for LightSquared also has put a spotlight on the FCC, which under chairman Julius Genachowski enthusiastically embraced LightSquared. Republican lawmakers say the chairman’s office granted a waiver to LightSquared in January 2011 to fast-track LightSquared’s plans to compete with AT&T and Verizon.
Eventually the agency dropped its support after the military expressed strong opposition to the plan and after Obama administration tests showed the network would interfere with GPS devices. An industry coalition, which included FedEx, John Deere and Garmin, a leading GPS device maker, also fought LightSquared’s proposal.
According to the bankruptcy filing, unsecured creditors include Boeing, which is owed $7 million; Alcatel-Lucent, owed $7 million; and Burson Marsteller, owed $265,000.