LightSquared Inc. filed for bankruptcy Monday after its plan to deliver high-speed wireless to as many as 260 million people ran afoul of U.S. regulators.
LightSquared, based in Reston, Va., had been an ally of Sprint Nextel Corp. but was opposed by Garmin Ltd., the Olathe-based GPS device maker, which had maintained that its network would interfere with global positioning systems. Regulators eventually sided with the opponents of LightSquared’s network technology.
On March 16, Sprint, based in Overland Park, ended an 11-year agreement to build, operate and share the network and compete with AT&T Inc. and Verizon Wireless. LightSquared paid Sprint $310 million in advance, and Sprint said in a securities filing Feb. 27 that it would return $65 million of the payments.
LightSquared had originally agreed to pay Sprint $9 billion for the network duties and issue an additional $4.5 billion in service credits. But the deal hinged on approval from the Federal Communications Commission.
LightSquared listed debt and assets of more than $1 billion each in a Chapter 11 filing Monday in U.S. Bankruptcy Court in Manhattan. The filing came after intense negotiations with creditors, who had requested that the company’s backer, Philip Falcone, step aside.
Bankruptcy “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,” Chief Financial Officer Marc Montagner said in a statement. Reaching agreements with U.S. agencies may take as long as two years, he said in court papers.
LightSquared listed Boeing Satellite Systems Inc., owed $7.5 million, and Alcatel-Lucent, owed $7.3 million, as among its largest creditors.
Harbinger Capital Partners, Falcone’s hedge fund, had invested $3 billion in LightSquared and owned about 74 percent of it as of Jan. 27. Falcone also had served on LightSquared’s board. Creditors reportedly asked for Falcone’s departure when they gave the company a weeklong extension on April 30 to renegotiate its debt.
LightSquared bondholders, including Carl Icahn, Andrew Beal and David Tepper, earlier gave Falcone a deadline of April 30 to revisit a waiver that avoided triggering a technical default on its debt.
Icahn sold his $250 million in LightSquared debt holdings, Reuters reported May 6. Icahn received about 60 cents on the dollar for the holdings on May 3, after originally paying about 40 cents on the dollar months earlier, Reuters said, citing unidentified sources. Dish Network Corp. Chairman Charlie Ergen, meanwhile, acquired $350 million of the debt, the New York Post reported.
Falcone’s plan for LightSquared depended on winning FCC approval to convert airwaves originally designated for satellite service to spectrum for land-based radio towers. LightSquared invested $4 billion in airwaves and reached deals with more than 30 partners, including Best Buy Co.
LightSquared hit a roadblock in February when the FCC said it would withdraw preliminary approval for the company’s network after government tests found that the signals would interfere with global-positioning systems.
The decision followed a yearlong lobbying fight between LightSquared and GPS users and providers. The Coalition to Save Our GPS included Garmin; package shippers FedEx Corp. and United Parcel Service Inc.; and farm-gear maker Deere & Co.