LightSquared filed for Chapter 11 bankruptcy protection on Monday after failing to reach a debt restructuring deal with its creditors, but the company said it was determined to pursue a controversial plan to create a wireless network using satellites.
The move ends a dramatic chapter in the firm’s battle with federal regulators who initially championed the company, but in recent months turned their back on LightSquared’s proposal after military and other officials said the satellite signals could interfere with GPS systems used broadly by airplanes, consumers and boaters, according to the Washington Post.
LightSquared, which is based in Reston, Va., listed assets of $4.48 billion and debt of $2.29 billion as of Feb. 29 in its Chapter 11 filing in U.S. Bankruptcy Court in Manhattan.
The company’s biggest investor, Philip Falcone of Harbinger Capital, said the firm filed for bankruptcy to buy time. Its bondholders had set a deadline of late Monday to restructure the firm’s debt. But those talks crumbled as the creditors, who lost faith in a plan that no longer had government support, called for Falcone to step aside.
“Today’s filing was not an option the company embraced quickly or easily, but it was necessary to protect LightSquared against creditors who were looking for a quick profit, as opposed to our goal to create long-term market competition, job creation and the promise of wireless connectivity for every American,” Falcone said in a statement.
Creditors lost faith in the venture after the Federal Communications Commission withdrew support of the plan in February and partner Sprint Nextel severed its business ties soon afterward.
The reversal of fortunes for LightSquared also has put a spotlight on the FCC, which under chairman Julius Genachowski enthusiastically embraced LightSquared. Republican lawmakers say the chairman’s office granted a waiver to LightSquared in January 2011 to fast-track LightSquared’s plans to compete with AT&T and Verizon.
Eventually the agency dropped its support after the military expressed strong opposition to the plan and after Obama administration tests showed the network would interfere with GPS devices. An industry coalition, which included FedEx, John Deere and Garmin, a leading GPS device maker, also fought LightSquared’s proposal.