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TheStreet Open House

Falcone's LightSquared Roams Into Bankruptcy

NEW YORK ( TheStreet) -- Philip Falcone-run hedge fund Harbinger Capital Management has put its multi-billion dollar 4G wireless investment LightSquared into bankruptcy.

After crippling regulatory setbacks and multiple extensions with its lenders, LightSquared, a high-speed wireless service that was planned to provide connectivity to 260 million users, was unable to continue negotiating a recovery strategy and has filed for Chapter 11 bankruptcy, a move that will likely wipe out most of Harbinger's near-$3 billion investment.

LightSquared listed more than $1 billion in assets and debt in its bankruptcy filing. Earlier on Monday, The Wall Street Journal and Reuters reported that a bankruptcy filing was imminent after negotiations with lenders broke off. While Carl Icahn was the most vocal lender calling for a bankruptcy, reports indicate that the activist investor has dumped his LightSquared stake and won't be a part of the bankruptcy process.





For Falcone, a former professional hockey player, LightSquared's bankruptcy is another giant blow to his fund Harbinger Capital Management, which at its peak had roughly $26 billion in assets under management after a successful bet against mortgage bonds prior to the housing bust. The fund's assets have dwindled to just a few billion, the New York Times reports.

Meanwhile, in bankruptcy LightSquared will likely receive greater input from its lenders like hedge fund manager David Tepper, Fortress Investment Group (FIG), Knighthead Capital Management, Redwood Capital Management and investment firm Capital Research. In the company's bankruptcy filing, LightSquared said that Boeing Satellite Systems and Alcatel-Lucent (ALU) are its largest claimants.

Reuters reported earlier in May that Carl Icahn, once a large owner of LightSquared debt, sold a $250 million position in the venture's debt at a moderate profit. Meanwhile, the New York Post reported that Charlie Ergen of Dish Network (DISH) acquired $350 million of the company's debt.

In April, Falcone said that he would consider a bankruptcy, however his focus was on swapping the venture's assets for spectrum controlled by the U.S. Department of Defense. Falcone also told Reuters that a bankruptcy would give LightSquared the chance to fix interference issues with global positioning devices as it tried to revive a build out of a nationwide wireless broadband network on airwaves once used by satellite systems.

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