Bankrupt LightSquared Gets Reprieve through September 2013

 - July 3, 2012, 2:40 AM

In its latest surprise move, would-be broadband provider LightSquared has morphed from a Chapter 11 bankruptcy case, with just a few months to find some closure with its creditors, to having an arrangement with them to allow it to continue in business and spend up to $190 million to fund its operations until September next year.

LightSquared owes its major lenders $1.1 billion, which it has agreed to repay at $6.25 million per month. Under a separate loan to another investor group, LightSquared owes $322.3 million, but the repayment details of that arrangement have not been revealed. Both repayment agreements are described as “final,” although to most observers that word appears to have a somewhat looser definition than one would find in most dictionaries. This seems particularly true of LightSquared, in view of late-May scuttlebutt on Wall Street that Mexican telecom billionaire Carlos Slim was showing interest in the company. One suggestion has been that Slim’s acquisition of LightSquared, once the current legal tangles are sorted out, could provide him with an advantageous bargaining chip with U.S. regulatory authorities in connection with the Mexican government’s plan to launch its future MexSat satellites in the same or adjacent L-Band frequencies as those currently owned by LightSquared.

But a talented entrepreneur can keep several balls in the air simultaneously. Due to what is now said to be a low-overhead “skeleton” staff, LightSquared owner Philip Falcone is reportedly putting aside a large part of his $190 million allowance from his creditors to pay for his coming legal assault on the Federal Communications Commission. Falcone is understood to claim that the FCC caused his company to spend more than $3 billion on the basis that the Commission advised him that it appeared fairly safe to proceed with his plan to build a powerful nationwide Internet transmitter network using frequencies close to those of GPS. Falcone is expected to assert that as the federal government’s guardian of the radio spectrum in the U.S., the FCC should have advised him that his plan was extremely unlikely to succeed, given the real risk of significantly interfering with the DOD-owned GPS.

No date has been set for those hearings.

Where will it all end? One can only say, watch this space.