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In May, the bet of Phil Falcone's life, a telecom venture called LightSquared, filed for bankruptcy. Now, the parties that hold $1.1 billion of $1.7 billion of the company's debt want Falcone to relinquish control of the project, Bloomberg reports.
Of course, he is fighting. But so are they.
In case you've forgotten, LightSquared was essentially put to death by the FCC. They ruled that the company could not build a high-speed wireless network because its signal interfered with Global Positioning Systems (GPS). Flacone had put $3 billion of his own capital into venture, and 96% of it was owned by his hedge fund, Harbinger Capital.
Court filings now indicate that the company's debt holders have two major problems with Falcone. The first is pretty simple — they think he should let a third party handle the bankruptcy. And they're not putting that tenderly.
“Having nothing to lose, Mr. Falcone wants to pursue a high-risk, high-return strategy” of trying to get regulators to reverse their stance on LightSquared’s technology, the lenders said. They favor a “more conservative approach that would realize value through a third-party transaction or otherwise force Mr. Falcone to put his money where his mouth is,” according to the filing.
The debt holders' second problem is that they object to a $6 million executive bonus plan on the table. Here are the terms: If LightSquared somehow claws its way out of bankruptcy by 2013, four "insiders" get cash bonuses worth as much as 285% of their salaries. They get bonuses worth 235% of their salaries regardless of how long it takes them to leave bankruptcy.
The bonus plan offers “little, if any, incentive to swiftly move these cases along,” while the company will probably use up $100 million in cash by the end of the first quarter of next year, the lenders said.
Sounds like they just want to put this thing to bed already.
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