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LightSquared, the mobile broadband startup backed by billionaire hedge fund manager Philip Falcone, filed for Chapter 11 bankruptcy protection May 14 (In re LightSquared Inc., et al., Bankr. S.D.N.Y., not yet numbered, 05/14/2012).
The move was widely expected, as LightSquared has been unable to reach a deal with its creditors since Sprint Nextel Corp. canceled a $9 billion agreement to help build the company's network in March.
“The voluntary Chapter 11 filing is intended to give LightSquared sufficient breathing room to continue working through the regulatory process that will allow us to build our 4G wireless network,” Marc Montagner, interim co-chief operating officer and chief financial officer of LightSquared, said in a press statement May 14. “All of our efforts are focused on concluding this process in an efficient and successful manner.”
In its filing in U.S. Bankruptcy Court for the Southern District of New York (Manhattan), LightSquared claimed more than $1 billion of both assets and liabilities.
Falcone first raised the possibility in April that LightSquared would file for bankruptcy, saying in a statement that doing so would afford the company more time to “…protect the company from creditors who are more interested in a quick flip.”
Falcone's plans to build the nation's first wholesale-only mobile broadband network hinge on obtaining approval from the Federal Communications Commission to use airwaves originally designated only for satellite service.
In February, the FCC said it would withdraw preliminary approval for the network after government tests found that the signals would interfere with global positioning systems.
The company has retained two prominent Washington lawyers--Ted Olson, former U.S. solicitor general, and Eugene Scalia, son of Supreme Court Justice Antonin Scalia--a move that indicates the company is planning to take the FCC to court.
Falcone also has pressed government officials to exchange LightSquared's spectrum for that controlled by the U.S. Department of Defense, which would alleviate the interference risk.
Harbinger Capital Partners, Falcone's New York-based hedge fund, had invested about $3 billion in LightSquared and owned about 74 percent of the firm as of Jan. 27. The company's creditors have requested that Falcone step aside.
The LightSquared voluntary petition for bankruptcy is online at http://op.bna.com/der.nsf/id/sbay-8uarm5/$File/https___ecf%20nysb%20uscourts%20gov_cgi-bin_show_temp%20pl_file11434857-0-nysb-437.pdf.
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