LightSquared fails to make payment on $56 million loan, lays off 45% of its employees
It looks like the LightSquared saga is coming to an end. On Monday, the third party mobile network wholesaler failed to payback a $56 million note held by British satellite partner Inmarsat. On Tuesday, the company laid-off 45% of its workers bringing the head count to 330. The company has been unable to get government regulators to sign off on LightSquared's network because of interference the government says comes from LightSquared's network. Sprint had signed a huge multi-year contract with LightSquared last year and has given the latter a number of chances to get its network up and running. The nation's third largest carrier gave LightSquared a final deadline to get the service up by next month or else it would walk away from the deal.
Last week, the FCC revoked a temporary approval it had given LightSquared saying that the company's network interferes with the GPS receivers used by airlines and the military. Trying to make that temporary approval permanent, the company spent $2.5 million on lobbyists vs. $265,000 the year before.
Despite what appears to be dire straits for LightSquared, its main backer, hedge fund manager Philip Falcone, says bankruptcy is not an option at the moment. However, it might be a consideration for those investors who are in Falcone's $4 billion Harbinger Capital Partners Fund. The fund has 60% of its assets in LightSquared and lost 47% last year after the value of its investments in LightSquared equity was marked to market. Falcone made his fortune by shorting sub-prime mortgages and once managed $26 billion. He has much of his personal wealth invested in the network wholesaler, a bet that is not looking good at the moment.
source: Reuters
Despite what appears to be dire straits for LightSquared, its main backer, hedge fund manager Philip Falcone, says bankruptcy is not an option at the moment. However, it might be a consideration for those investors who are in Falcone's $4 billion Harbinger Capital Partners Fund. The fund has 60% of its assets in LightSquared and lost 47% last year after the value of its investments in LightSquared equity was marked to market. Falcone made his fortune by shorting sub-prime mortgages and once managed $26 billion. He has much of his personal wealth invested in the network wholesaler, a bet that is not looking good at the moment.
Weeks ago, 80's takeover artist Carl Icahn was said to have invested in some of LightSquared's debt at bargain prices, along with other distressed debt investors. For those guys, the first step to taking control of LightSquared would be to see the company fall into bankruptcy where they can then wield their power in a reorganization thanks to their position as debt holders.
source: Reuters
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