NEW YORK — LightSquared Inc. on Monday filed for bankruptcy, saying it will seek to resolve the concerns of U.S. regulators who thwarted the company’s plan to deliver high-speed wireless to as many as 260 million people.
LightSquared, based in Reston, Va., listed assets of $4.48 billion and debt of $2.29 billion as of Feb. 29 in a Chapter 11 filing Monday in U.S. Bankruptcy Court in Manhattan.
The filing followed intense negotiations with creditors, who had requested that the company’s backer, Philip Falcone, step aside. Falcone and the current management team will remain with the company, Terry Neal, a LightSquared spokesman, said Monday.
Bankruptcy “is intended to give LightSquared sufficient breathing room to continue working through the regulatory process that will allow us to build our 4G wireless network,” Chief Financial Officer Marc Montagner said in a statement.
Harbinger Capital Partners, Falcone’s New York-based hedge fund, had invested about $3 billion in LightSquared and owned about 74 percent of it as of Jan. 27. Falcone had served on LightSquared’s board.
Creditors asked for Falcone’s departure when they gave the company a weeklong extension April 30 to stave off a default and keep trying to renegotiate its debt, according to a person with knowledge of the matter.
“Today’s filing was not an option the company embraced quickly or easily, but it was necessary to protect LightSquared against creditors who were looking for a quick profit,” Falcone said in a statement. “We remain committed to our original mission, and I remain steadfast in my belief that a path forward exists that will satisfy and benefit all constituencies.”
LightSquared last week received a second weeklong extension from creditors, delaying a potential bankruptcy.
Bondholders, including Carl Icahn, Andrew Beal and David Tepper earlier gave Falcone a deadline of April 30 to revisit a waiver that avoided triggering a technical default on its debt.
Icahn sold his $250 million in LightSquared debt holdings, Reuters reported May 6. Icahn received about 60 cents on the dollar for the holdings on May 3, after originally paying about 40 cents on the dollar months earlier, Reuters said, citing unidentified sources. Dish Network Corp. Chairman Charlie Ergen, meanwhile, acquired $350 million of the debt, the New York Post reported.
Falcone’s plan for LightSquared depended on winning Federal Communications Commission approval to convert airwaves originally designated for satellite service to spectrum for land-based radio towers. LightSquared invested $4 billion in airwaves and reached deals with more than 30 partners, including Best Buy Co.
LightSquared hit a roadblock in February when the FCC said it would withdraw preliminary approval for the company’s network after government tests found that the signals would interfere with global-positioning systems.
The decision followed a yearlong lobbying fight between LightSquared and GPS users and providers. The Coalition to Save Our GPS, a group formed to oppose LightSquared’s plans, included package shippers FedEx Corp. and United Parcel Service Inc., GPS-unit maker Garmin and farm-gear maker Deere & Co.
Falcone said April 4 that he was considering bankruptcy for LightSquared, though he would rather get the government to swap his spectrum for that controlled by the Defense Department.
A voluntary filing would provide time to “continue with our vision, build the network and protect the company from creditors who are more interested in a quick flip,” Falcone said in an April 5 statement.
The company’s Canadian and Bermudan affiliates also filed for court protection Monday. LightSquared employed 168 people in the U.S. and Canada, according to court papers. The company said its satellite business, with 300,000 users, generated revenue of about $30 million a year.
LightSquared’s biggest unsecured creditors include Boeing Satellite Systems, owed $7.5 million, and Alcatel-Lucent, owed $7.3 million.
Trouble for the company began in December, when a draft summary of test results showed that LightSquared signals interfered with about 75 percent of GPS receivers. That same month, billionaire Icahn, along with Beal and Tepper, bought $300 million of the company’s debt sold by Farallon Capital Management, two people told Bloomberg News.
The National Telecommunications and Information Administration advised the FCC on LightSquared’s proposed system. In February, NTIA’s administrator sent a letter to the FCC chairman saying there were “no mitigation strategies that both solve the interference issues and provide LightSquared with an adequate commercial network deployment.”
The opinion to block the approval caused a cascade of events for LightSquared. On March 16, Sprint ended an 11-year agreement to build, operate and share the network and compete with AT&T and Verizon Wireless. LightSquared paid Sprint $310 million in advance and Sprint said in a securities filing Feb. 27 that it would return $65 million of the payments.