After weeks of scrambling to save the company from certain failure, LightSquared and its founder Philip Falcone may be on their last legs as the latest talks with creditors on owed debts and refinancing have broken down and the only alternative left is to officially file for Chapter 11 bankruptcy protection as it currently owes an estimated $1.6 billion across multiple creditors.
The latest problem for the company comes as both Falcone and LightSquared face litigation regarding the viability of the venture after the FCC rejected the network launch due to concerns that the network as currently constructed and developed had been proven to disrupt GPS infrastructure to the extent that civilian and military use was severely affected after multiple tests to determine viability were conducted, tests that were alleged by Falcone to be intentionally tampered with by the influence of the military and by the trade association responsible for the commercial management of GPS access.
After the FCC rejection, wholesale customers began to pull away as quickly as possible while scrambling to find alternatives and its network hosting agreement with Sprint collapsed after it could not gain approval from the FCC to rollout without extensive and costly modification to its original plans. With the rejection of the network and no way to earn any revenue from it, LightSquared has essentially been frozen since then and undertook desperate cash-saving measures, such as firing almost half of its staff and operating with as few unnecessary positions as possible before losing executives in droves.
With the company also skipping out on massive debt covenants as a result of the lack of revenue and shareholders becoming increasingly disgruntled at Falcone’s handling of the situation, it was only a matter of time before LightSquared would be forced into such a situation, as those same shareholders are actively pursuing litigation against Falcone and majority stakeholder Harbinger Capital Partners, which also happens to be managed by Falcone and its holdings used to form LightSquared.
Update: As of 1PM EST, LightSquared has filed for Chapter 11 bankruptcy protection in the state of New York via the bankruptcy court in Manhattan. The ledger notes that LightSquared declared Chapter 11 with $1 billion in assets and a total of $1 billion in liabilities with Boeing Satellite Systems and Alcatel-Lucent being listed as the ventures largest creditors