LightSquared Moves Toward Bankruptcy

Hedge-fund manager Philip Falcone's LightSquared Inc. venture was preparing May 13 to file for bankruptcy protection after negotiations with lenders to avoid a potential debt default faltered, said people familiar with the matter.

LightSquared and its lenders still have until 5 p.m. May 14 to reach a deal that would keep the wireless-networking company out of bankruptcy court, and there were some indications over the weekend that a final decision hadn't yet been reached on its fate. Still, the two sides remained far apart, and people involved in the negotiations expected LightSquared to begin making bankruptcy preparations in earnest. LightSquared, which violated terms of its debt long ago, received a waiver from lenders to keep it from defaulting. The lenders have extended the waiver twice, but aren't expected to do so again before it expires Monday evening, said people familiar with the matter. Mr. Falcone, whose Harbinger Capital Partners is LightSquared's main backer, couldn't agree with lenders on how to cede ownership stakes in the wireless venture to them over time, the people said. There were also a number of other terms separating the two sides, the people said.