NEW YORK (TheStreet) - After a string of crippling setbacks, Philip Falcone-run hedge fund Harbinger Capital Management may be close to hanging up on LightSquared, a multi-billion dollar 4G wireless investment.
In a Wednesday interview, Reuters reports Falcone as saying he is "seriously considering" having Lightsquared file bankruptcy as a way to ward off angry creditors, including activist investor Carl Icahn.
Falcone told Reuters that a bankruptcy would give LightSquared the chance to fix interference issues with global positioning devices as it tries to revive a build out of a nationwide wireless broadband network on airwaves once used by satellite systems.
In February, the FCC said that the network would interfere with the GPS used by airlines, the military and others. Since then, LightSquared has faced an exodus of wireless partners like Sprint (S) and Leap Wireless (LEAP) and calls by its creditors to enter bankruptcy, which could wipe out Harbinger's $2.9 billion investment. The company also cut 45% of its staff to preserve cash, as it searches for a survival strategy.In a separate Wednesday article, the New York Post said that Falcone is still resisting calls from large creditors like Carl Icahn to enter bankruptcy. LightSquared has until the end of April before creditors call a breach of covenants on a $1.6 billion loan that would put it in default, according to the reports. However, in the Reuters interview, Falcone said that as LightSquared considers bankruptcy, his hedge fund's investment may not be wiped out on the remaining value of LightSquared's spectrum assets. In its now iced partnership with Sprint, LightSquared was to pay $9 billion and give an additional $4.5 billion in credits to Sprint to build out the network. After walking away from LightSuared in mid-March, Sprint agreed to return $65 million in prepayments to LightSquared that the nation's third leading wireless carrier made under a 11 year-wireless service agreement that started in June 2011. In March, Wells Fargo analyst Jennifer Fritzsche wrote in a note that the partnership break between Sprint and LightSquared will benefit Clearwire (CLWR) as the carrier bolsters its smartphone services to better compete against Verizon (VZ) and AT&T (T). In March, Clearwire locked up pre-paid wireless carrier Leap Wireless (LEAP) in a network sharing contract, adding to LightSquared defections. For more on Sprint and wireless carrier shares, see why the iPhone is causing telecom hangups and who's on a slow walk to bankruptcy. -- Written by Antoine Gara in New York
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