US satellite/terrestrial LTE venture LightSquared has received another week-long extension to continue talks aimed at avoiding a default on its debt.
Creditors have set a deadline of 14 May for negotiations with the venture’s main backer, New…
US satellite/terrestrial LTE venture LightSquared has received another week-long extension to continue talks aimed at avoiding a default on its debt.
Creditors have set a deadline of 14 May for negotiations with the venture’s main backer, New York-based hedge fund Harbinger Capital Partners, to reduce its 96% stake in the company.
The holders of its US$1.6bn of first lien debt, who had previously given Harbinger until 7 May to negotiate a restructuring, are also rumoured to be calling for Phil Falcone, the hedgefund’s manager, to step down from the LightSquared board, according to reports.
However, Reuters reported on 6 May that activist investor Carl Icahn, who had been seen as the main proponent to calls for Falcone to step down, had sold his US$250m of LightSquared debt.
Citing sources, Reuters claimed Icahn sold the debt for around 60 cents on the dollar, a significant profit compared with the 40 cents on the dollar price he paid only months before.
Meanwhile, industry spectators have pointed to links held by investment firm Sound Point Capital, the reported buyer of the debt, with Charlie Ergen, the chairman of US satellite TV provider Dish Network.
Sound Point Capital was founded in 2009 by investment banker Stephen Ketchum, who reports explain has previously worked with Dish.
The New York Post claimed on 8 May that, in addition to Icahn’s holding, Ergen had quietly acquired a further US$100m of LightSquared debt, bringing his total to around US$350m. Rumours that a strategic player might be in the frame helped push the debt to trade at nearly 70 cents on the dollar, added the report.
Neither party was able to comment before the press deadline.
Ergen already has a reputation for buying spectrum assets out of bankruptcy. Dish’s current spectrum holdings are derived from assets held by mobile satellite operators TerreStar Networks and DBSD North America, both of which were acquired separately out of bankruptcy protection last year. Dish is aiming to launch a terrestrial-only wireless broadband network in the US under a proposal currently being reviewed by the FCC.
However, unlike Dish’s spectrum, the frequencies LightSquared plans to use to deploy its own terrestrial network are plagued with interference issues. LightSquared is currently prohibited from launching commercially because its spectrum interferes with GPS technology, and the venture is still searching for a workaround that would allow it to provide services in some other form.
As a result of being unable to launch commercially, Falcone told reporters back in April that he was considering filing for bankruptcy protection for LightSquared, adding that the move would not necessarily wipe out all of its shareholders. The reason being the inherent interest Falcone still sees in LightSquared’s spectrum, despite the interference issues, which would remain whether or not the group entered bankruptcy.
Among LightSquared’s first lien lenders are distressed asset specialist David Tepper, and hedge funds Fortress Investment Group, Knighthead Capital Management, Redwood Capital Management and Capital Research & Management Company (part of the Capital Group).
Moelis & Co is rumoured to have been hired by LightSquared to look at the venture’s restructuring options, while Kirkland & Ellis and Latham & Watkins have been providing legal advice to Harbinger.
