LightSquared had previously violated the terms of its debt and received two waivers in an attempt to work things out. A third waiver is not expected to be offered. This is actually good news for vulture investors like Carl Icahn who purchased LightSquared debt for pennies on the dollar. Back in January, LightSquared debt was trading at 40 cents on the dollar and is significantly lower now. Speculation is that Icahn has added to his holdings by buying the LightSquared position belonging to Dish Network's Charlie Ergen. But investors like Icahn aren't looking for the quick buck. A bankruptcy filing would give current LightSquared management several months of exclusivity to come up with a solution to exit bankruptcy. The protection could be extended by a bankruptcy judge to 18 months. Once the company loses its exclusivity to file a plan, the vulture investors can then come up with their own plan for the company to exit bankruptcy. The court would make the ultimate decision of which plan to follow.
hedge-fund manager has billions of his and his firm's money invested in LightSquared. The lenders currently hold $800 million in senior debt, about half of the company's total of such debt. That gives the lenders the ability to block any restructuring.