LightSquared creditors unite against Phil Falcone

Tue Apr 24, 2012 4:43pm EDT
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By Matthew Goldstein

NEW YORK (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.   Continued...

Hedge fund manager Philip Falcone, senior managing director of Harbinger Capital Partners, testifies before a US House Oversight and Government Reform Committee hearing on the regulation of hedge funds, on Capitol Hill in Washington, November 13, 2008. REUTERS/Jonathan Ernst