LightSquared Files for Chapter 11 Bankruptcy in Bid to Buy Time
NEWS ANALYSIS: LightSquared’s Chapter 11 bankruptcy petition will give it time to seek a solution for its failure to meet regulatory requirements, the company says.
LightSquared tried the business worlds version of a Hail Mary pass by filing for Chapter 11 bankruptcy protection from its creditors. According to a statement released by the company, LightSquared needs time to resolve regulatory issues that have plagued the company since it first received conditional approval from the FCC to operate a terrestrial data service on mobile satellite bands it purchased in a spectrum auction.
Prior to the bankruptcy filing, LightSquareds creditors had given it a series of one-week extensions during which intense negotiations with creditors took place, and in which the creditors reportedly requested that investor Philip Falcone, who through his hedge fund Harbinger Capital Partners controls the company, step aside. Instead, Falcone took the company into bankruptcy so that it could reorganize. According to the companys statement on the bankruptcy, the reorganization is one in which Falcone and the current LightSquared management team will remain in place and all other activities will continue as before.
While the restructuring appears to be theoretical at best, the company said that the real reason for the bankruptcy was to give LightSquared sufficient breathing room to continue working through the regulatory process that will allow us to build our 4G wireless network, said Marc Montagner, interim COO and CFO. The details of the LightSquared bankruptcy are available from Kurtzman Carlson Consultants.
LightSquareds bankruptcy gambit comes as a surprise to few considering that the companys financial woes were well documented. In a series of last-gasp efforts, the company hired lobbyists in an effort to overturn the FCC decision, and wrangled with creditors to keep the company alive for increasingly futile efforts to stave off sale or shutdown of the company. The bankruptcy is simply one more means to keep hope alive.
The investors, meanwhile, are left holding the bag. LightSquared is currently hoping to convince the U.S. government to swap its existing spectrum for spectrum currently controlled by the Department of Defense. That spectrum is far enough away from GPS frequencies that LightSquared could operate its 4G LTE network without creating interference. So far, LightSquared efforts to swap its now useless spectrum for something else havent been getting a lot of traction.
But that doesnt mean it wont work. The FCC is currently preparing a massive spectrum auction which the agency is advertising as a way to pay down the cost of payroll tax cuts. Some of the spectrum that the FCC wants to sell is what LightSquared could use to replace the mobile satellite spectrum it has now.