LightSquared turns another page... into Chapter 11

Is it a vertical rocket launch? Is it a bumpy runway take-off?  Who knows.  It's certainly vintage Philip Falcone, the man who has made an - up to now - lucrative career out of never saying 'die', even when multiple litigants, judges and competitors might be standing in his way.

Yesterday, as expected, LightSquared and its lenders and creditors failed to come up with a sufficiently cunning plan (not one Falcone was willing to share, anyway) likely to stave off insolvency and so LightSquared will go into that peculiarly American Last Chance Saloon - Chapter 11. 

 

The deal is that in exchange for a reasonably detailed and feasible plan for business and balance sheet reconstruction, a judge gives an applicant company a period of creditor protection to see the plan through. During that time the creditors are unable to trigger administration or liquidation.

The company claims it will continue normal operation and existing partners and customers  can continue to use its service. It says it intends to use the breathing space to "work through the regulatory process." 

Neither does it appear likely that the existing management team, including Philip Falcone, are due to step down, despite speculation that his resignation would be required to see through a deal.

Falcone himself says that Chapter 11 was a necessary measure to stop the company being dissolved for its assets, an act that would see a quick profit for creditors when the spectrum was sold off. LightSquared is thought to be about $2 billion in the hole since the FCC rejected its plans due to the interference problem.

About a decade ago Chapter 11 was all the rage, with about half the US competitive telecoms industry (only a slight exaggeration) either already in it, or actively considering the move. Today, because of the financial crisis, recession and general gloom, Chapter 11 is making an increasing number of appearances as a home for recession-squeezed corporations floored by consumer austerity.

LightSquared is not one of those. It had the temerity to threaten the US mobile market  with a disruptive wholesale LTE capacity play. And it made the huge mistake of  making an enemy of the - as it turns out - diverse and powerful GPS (global positioning system) market which alleged that LightSquared's satellite-assigned (originally) spectrum meant that its transmissions would screw up the system.  Tests appeared to show that it did, although LightSquared and some experts argued that this was because some GPS terminal admitted interference from the adjacent band. (see - LightSquared refuses to "go gentle into that good night")