LightSquared’s hedge fund manager considers bankruptcy

The situation over at the aspiring 4G LTE provider, LightSquared, is becoming more dire by the day. After losing its contract with Sprint and having its license revoked by the FCC, hedge fund manager Philip Falcone said he is “seriously considering” filing a voluntary bankruptcy for LightSquared.

Falcone is a part of Harbinger Capital Partners, which is the majority owner of the struggling startup. Coming off a $427 million net loss in the first 9 months of 2011, Falcone is looking at several options to salvage the company. He believes that LightSquared’s spectrum assets still retain significant value; therefore a bankruptcy would not definitively wipe out the equity holders.

LightSquared currently has a $1.6 billion loan from its creditors. Reuters reports that several of the hedge fund’s creditors have given Falcone until the end of the month to make a deal before they force the company into bankruptcy.

Overall, the outlook looks extremely bleak for LightSquared. While anything is possible, chances are LightSquared will be a venture of the past very soon.

source: Reuters

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posted on 05 Apr 2012, 13:03 1

1. hepresearch (unregistered)

LightSquared sort of brought this upon themselves, but I still can't help but feel bad for them. Yes, they made a huge set of fundamental mistakes, and they wasted a lot of money that they didn't even have (they had to get a gi-freaking-normous loan) on worthless spectrum... but they were helped into it by the FCC, ultimately. All it took was a very badly done pre-auction spectrum analysis to start this mess rolling. The L-Band should never have come up for auction.

posted on 05 Apr 2012, 14:05 2

2. downphoenix (Posts: 3165; Member since: 19 Jun 2010)

how did they bring it on themselves? They were licensed bad spectrum by the FCC that close to the range of GPS and the inefficient GPS radios interfered with their spectrums then the FCC renigged on the spectrum approval. It was brought upon by AT&T and Verizon lobbyists in conjunction with lobbyists from the GPS industry because Lightsquared would have brought LTE capabilities to sprint and smaller carriers in a competitive position to theirs.

posted on 05 Apr 2012, 14:09 2

3. Sparhawk (Posts: 75; Member since: 10 Mar 2012)

"They were licensed bad spectrum by the FCC?" The company bid for and won that specific spectrum, which was not intended for LTE service. IT was originally intended for earth-to-satellite transmission, but LightSquared repurposed it for LTE service.

LightSquared attemped to use the spectrum for a reason other than the one they told the FCC they would use it for. Their new use interfered with existing GPS services, so yes, they brought this upon themselves.

posted on 05 Apr 2012, 14:22 1

4. Droid_X_Doug (Posts: 5993; Member since: 22 Dec 2010)

Apparently downphoenix believes that the FCC hould keep hedge funds from making bad investments. And then when they make a bad investment, they should be bailed out by the feds for making the bad investment.

LightSquared brought it on themselves. BK is a normal part of the process of closing out bad investments.

posted on 06 Apr 2012, 08:36

9. hepresearch (unregistered)

Clearly, LightSquared did not do their homework when they bid on the L-Band offerings... but the FCC was willing to put it up for auction in the first place... all sorts of people claim that the government is in this business to protect consumers and customers from buying a bad deal, but what the heck was that? They knew LTE would be put on it... yes, LightSquared decided to switch to TD-LTE, but that will not appreciably change the attenuation and other immediate characteristics of the spectrum much at all... it's still OFDMA at its core, single-carrier up, multi-carrier or direct-spread down. Clearly the FCC failed to do its homework, too. There has to be some organization to prevent harmful interference, but it is getting difficult to rely upon the government to do the right thing when they are making the money and big corporations, with lots of money (or loans from banks or investors) from the start, are the customers. Bankruptcy is also a necessary part of the system, but I wouldn't want to see it being abused even more.

This situation is the result of a general lack of responsibility on both ends.

posted on 05 Apr 2012, 15:09 1

5. jmoita2 (Posts: 930; Member since: 23 Dec 2011)

For once,let these Wall Street banksters take a loss when they make a bad gamble. Trust me,if I make one nobody bails me out. They want free markets to rule everything,so they gotta take the good with the bad. I find it ironic to see the poor puppy faces these crooks put on whenever they have to stand in front of a judge,however seldom that happens.

posted on 05 Apr 2012, 15:14 2

6. Droid_X_Doug (Posts: 5993; Member since: 22 Dec 2010)

Hedge funds really don't want the market to dictate for them. Their preferred model is to have the gains privatized (and taxed at the 15% capital gains rate - check Mittens tax returns), while losses are socialized. That is a win-win for the hedge fund. And a lose-lose for everyone else.

posted on 05 Apr 2012, 15:29 1

7. jmoita2 (Posts: 930; Member since: 23 Dec 2011)

By the way,Falcone is one of the richest men in America, but flat out refuses to pay property taxes on his muiti million dollar estates. He is also under investigation for taking money from this same hedge fund to pay tax bills,which he refuses to do with his own millions...

posted on 05 Apr 2012, 16:46 2

8. Republican (Posts: 99; Member since: 05 Apr 2012)

Poor Executive,thanks to those heroes od Industry like him America is a powerhouse. And yes,the Rich need to pay as little taxes as possible. It's their money. Who do you think keeps you employed??? Ever heard of Trickle Down Economics???