LightSquared lenders oppose restructure plans

Lenders to ailing US wholesale player LightSquared have voiced their opposition to the CEO Philip Falcone’s plans to resurrect the business. The firm filed for Chapter 11 bankruptcy protection in May this year, but now its lenders have told a US bankruptcy court that Falcone’s plans are “too risky”.

The carrier planned to build a ground-based LTE network, supported by satellites, but hit several stumbling blocks, most notably when the Federal Communications Commission (FCC) blocked the project due to the impact it would have on GPS services. LightSquared subsequently filed “voluntarily reorganisation cases under Chapter 11 of the US Bankruptcy Code” as it looked to continue operating the business.

“The 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,” said Marc Montagner, interim co-chief operating officer and chief financial officer, at the time.

Now the firm has asked a Manhattan bankruptcy court for a 150-day extension of its exclusive right to control the bankruptcy case. But lenders, who together say they own around $1.1bn of the $1.7bn in secured debt of the company’s LP unit, objected to the filing.

“Having nothing to lose, Falcone wants to pursue a high-risk, high-return strategy” of trying to get regulators to reverse their stance on LightSquared’s technology, the lenders said, according to news agency Bloomberg. They added that they favour a “more conservative approach that would realise value through a third-party transaction or otherwise force Mr. Falcone to put his money where his mouth is”.

Dimitris Mavrakis, principal analyst – networks, at Informa Telecoms and Media, said at the time of the bankruptcy filing that investor trust towards Falcone would be a major challenge for the firm going forward.

“It is not entirely clear what will happen with LightSquared’s spectrum, but if the company folds, it’s very likely that it may be leased to a third party satellite provider,” he added. 

The firm has until November 10 to solicit creditor approval.