* LightSquared debt holders hire White & Case lawyer
* Falcone and creditors face an April 30 covenant deadline
By Matthew Goldstein
NEW YORK, April 24 (Reuters) – Hedge fund manager Philip
Falcone will face a united front when negotiating with key
investors that own bank debt sold by LightSquared, the
money-losing wireless telecom company controlled by his fund.
A number of LightSquared debt holders have joined together
to retain high-powered bankruptcy attorney Thomas Lauria, who
heads White & Case’s global restructuring group, said two people
familiar with the situation.
The sources, who did not want to be identified, said the
creditors’ group includes billionaire activist investor Carl
Icahn, hedge fund manager David Tepper and investment firms
Fortress Investment Group and Capital Research and
Management Company.
Institutional investors own some of the $1.6 billion in bank
debt that LightSquared sold to raise money for its planned
wireless telecommunications network. LightSquared is facing an
April 30 deadline to renegotiate the terms of the loan in order
to head off a potential default that would spur a bankruptcy
filing.
Lauria and his clients could not be reached for comment.
Falcone declined to comment.
Falcone, whose Harbinger Capital Partners owns roughly a 96
percent equity stake in LightSquared, has said he might file a
voluntary bankruptcy for the telecom. Falcone has said a
bankruptcy would not necessarily wipe out his hedge fund’s
considerable equity stake in LightSquared because its operating
spectrum licenses retain value.
The two sources familiar with Lauria’s hiring said it was
unclear whether the investors and Falcone would be able to reach
a deal to avert a default.
The debt holders, who are believed to own roughly half of
the $1.6 billion of LightSquared bank debt, are interested in
reducing Falcone’s and Harbinger’s equity stake in the company,
sources said.
LightSquared lost $532 million last year, according to a
recently completed financial statement for the company.
The company’s balance sheet says it has about $282 million
in cash and short-term investments. But the financial statement
al so s ays LightSquared has $1.85 billion in liabilities,
including the debt held by the investors.
The financial statement lists about $453 million in debt
payments the company is obligated to make by the end o f 2012,
unless it reaches an agreement with its creditors.
The statement adds there is “substantial doubt about our
ability to continue as a going concern.”
LightSquared’s fate has become an important concern for
investors in Falcone’s $3.8 billion hedge fund, which has sunk
roughly 60 percent of its money into the telecom startup. The
success or failure of LightSquared will go a long way in
determining Falcone’s legacy as a money manager.
Not too long ago Falcone was the toast of hedge fund row
after his fund soared to $26 billion in assets after making a
wildly successful bet on the collapse of the U.S. housing
market.
The talk of a potential bankruptcy began to swirl in
February after the Federal Communications Commission withdrew a
conditional waiver that would have allowed LightSquared to begin
building out its mobile network. Without the waiver,
LightSquared is severely limited in moving forward with its
plans.
The FCC revoked the waiver after tests revealed that
LightSquared’s planned network would interfere with crucial
satellite systems used for aviation safety and by the U.S.
Department of Defense. The FCC action also came after bitter
protests from a trade group representing companies that rely on
Global Positioning Systems, which operate in a spectrum close to
LightSquared.
