LightSquared Receives Second Extension from Creditors

Philip Falcone's struggling wireless venture, LightSquared has received another one-week extension from creditors, postponing a possible debt default while Falcone considers a proposal from investors to cede control of the company. If Falcone can't come to an agreement with creditors, he would most likely be forced to seek bankruptcy protection, according to the Wall Street Journal.

The extension extends a painful five-month stretch for LightSquared, which saw its plans of competing in the thriving wholesale wireless market dashed when the FCC refused to approve its long-awaited network, saying its interferes with GPS receivers and flight control systems. The startup was given several deadlines to fix its network – and tried a number remedies, including using a lower spectrum band from satellite firm, Inmarsat – but has been unable to garner approval from the FCC.

LightSquared has since been forced to stop work on its network, default on payments to creditors and cut nearly half its staff. Former partners Sprint and Leap Wireless compounded the damage by walking away from their network-sharing agreement with LightSquared. Falcone took over control of the startup after CEO Sanjiv Ahuja abruptly resigned in February.

With the future looking bleak, creditors have been pushing to remove Falcone from his leadership position in the company. The two sides are reportedly working on the details of a proposal to restructure LightSquared and limit the company's ability to seek Chapter 11 protection, according to the Journal.

Falcone is apparently balking at a proposal that would force him to write a $1.7 billion check to creditors if he is later found to have steered the company toward seeking bankruptcy protection. The lenders are also negotiating for equity in the company if it eventually becomes successful.

One man who won't have a say in the matter is billionaire investor Carl Icahn, who has sold his $250 million debt holdings in LightSquared to investment firm Sound Point Capital, according to Reuters. Icahn reportedly sold his position for 60 cents on the dollar after purchasing the debt for around 70 percent of that only a few months ago.