Icahn Sells LightSquared Debt, Creditors Extend Talks

 @JosephLazzaro
on May 07 2012 11:53 AM
Carl C. Icahn
Carl C. Icahn Reuters

(Reuters) - Billionaire investor Carl Icahn has sold his $250 million debt holdings in Philip Falcone's telecom start-up LightSquared MOSAV.UL, while Falcone continues to negotiate with creditors to avoid a debt default, according to sources familiar with the matter.

News of Icahn's debt sale comes as remaining creditors agreed to a second week-long extension until May 14 of their talks with Falcone about reducing his firm, Harbinger Capital Partners' 96 percent equity stake in LightSquared.

One hedge fund representative said some constructive progress has been made in talks that began in earnest between LightSquared and its creditors two weeks ago over a potential default on $1.6 billion of LightSquared debt.

Meanwhile, Icahn, who was seen as one of the leaders in pushing for Falcone to reduce his role in LightSquared, appears to have made a big profit on the sale, according to the sources familiar with the matter.

The investor on Thursday sold his debt for about 60 cents on the dollar after buying the position when it was trading in the low 40-cents range only months before, several people familiar with the matter said.

Two sources familiar with it said the buyer of Icahn's debt was Sound Point Capital, a small investment firm led by Stephen Ketchum, who formed the company in 2009.

Ketchum previously worked as an investment banker and one of his clients was Charlie Ergen's satellite company. Similar to LightSquared, Ergen's Dish Network (DISH.O) owns wireless airwaves but has not received regulatory approval to use the spectrum to build a high-speed wireless network.

Ketchum was not immediately available for a comment. Nor was a representative for Icahn. A spokesman for Harbinger was not immediately available to comment on the extension.

UNCERTAIN FUTURE

LightSquared's future was thrown into doubt in February after the U.S. Federal Communications Commission said it would revoke the start-up's permission to use its spectrum licenses to build a high-speed wireless network because tests had shown that it would risk interfering with Global Positioning Systems.

These systems support crucial services such as aviation safety and military systems as well as devices used in industries such as construction and agriculture.

The fate of LightSquared, whose business model was dependent on being able to build a wireless network, is an important concern for investors in Falcone's $3.8 billion hedge fund Harbinger, which has sunk some 60 percent of its money into the telecom startup.

After the FCC action, LightSquared debt holders, including Icahn and hedge fund manager David Tepper, had initially threatened to declare a default on the $1.6 billion in loans if they could not reach an agreement by April 30. A person close to Tepper's Appaloosa Management said the manager's hedge fund still owns LightSquared debt.

Last week, the creditors had already extended that deadline until May 7, before extending it again.

Harbinger last year posted a 47 percent decline in value, largely because of a write-down on the value of the LightSquared investment.

LightSquared's predicament is also being closely watched by the telecommunications industry, which says it is crying out for access to additional wireless airwaves to support high-speed data services.

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