Hedge funder Phil Falcone has agreed to step down as the public face of Lightsquared so the embattled company can negotiate the extension of a debt payment deadline in order to avoid bankruptcy, the Wall Street Journal reported.The move comes after the WSJ reported Friday that Falcone was facing pressure from Lightsquared’s board to step down from his post on the board of directors and his role publicly representing the company. It has been reported that Falcone has nearly $3 billion invested in the wireless satellite provider.
Just two weeks ago, Falcone told Businessweek that he was willing to put the company in bankruptcy and engage in legal battle to regain control of the company. But now that Falcone’s stepping away from the limelight so the company can attempt to extend their debt payments, bankruptcy is definitely not the first option anymore. Despite all the money Falcone has funneled into the venture, he’s obviously not the only person in charge at Lightsquared anymore.
As part of the short-term deal, Mr. Falcone would agree to make LightSquared a “bankruptcy-remote” company through provisions that would make it difficult for the wireless communications firm to seek Chapter 11 protection, the people said. Lenders have proposed Mr. Falcone be personally liable if it can be demonstrated that he supported, encouraged or caused a LightSquared bankruptcy at a later date, the people said. That liability—known in restructuring circles as a “bad boy” clause—could result in Mr. Falcone repaying the lenders’ $1.6 billion in debt from his own pocket, one of the people said.