Lightsquared Buys Time with Inmarsat Payment

Lightsquared Inc., the U.S. group attempting to build a wireless network using satellite spectrum, has recently made an overdue payment of $56.25 million to British satellite firm, Inmarsat PLC (ISA.L).

HARBINGER

This payment is in relation to its spectrum-cooperation accord with Inmarsat and has paved the way for the granting of an extension on further installments until April 2014. According to Inmarsat’s press release, “As a result of the amendment announced today, LightSquared will no longer be in default in relation to any payments under the Cooperation Agreement. Notices of default issued by Inmarsat to LightSquared in relation to previous non-payment events will no longer have any effect.”

Lightsquared Inc., is backed by Philip Falcone’s Harbinger Capital Partners. His fund has invested over $3 billion in the venture and hasn’t generated much revenue so far. According to REUTERS, “LightSquared’s plans were derailed when the U.S. Federal Communications Commission in February proposed to stop it from building a high-speed wireless network after tests had found that the network could interfere with GPS services used by everyone from farmers and drivers to airlines and the military”. This major road block has even made Falcone consider filing for bankruptcy , but this new payment to Inmarsat sure looks like he’s not yet ready to give up.

This new accord with Inmarsat PLC has definitely bought Lightsquared Inc. some much needed breathing space to deal with its U.S. FCC problems. According to Lightsquared’s press release, the FCC ruling is “legally unprecedented, not supported by technical evidence, and inconsistent with other recent commission action”.

During proceedings like these, no one really knows how things will turn out for Lighstquared and the FCC. They may or may not get a ruling in their favour and the process itself might be a very complicated one. In short, Harbinger Capital Partners, with its tremendous exposure to Lightsquared Inc., is in a very difficult situation. The remaining investors in the fund don’t necessarily face the risk of losing all their money should the FCC remain adamant with its previous decision. A REUTERS article wrote, “Falcone said a bankruptcy would not necessarily wipe out the equity holders of LightSquared because the spectrum it owns retains value.” On the flip side, these remaining investors also stand to win many times their money back should the FCC decide in Lightsquared’s favor.

In light of this uncertainty, one good way for investors in Harbinger is to try to hedge their investments by buying long-term put options for the traded shares of Harbinger Group Inc. (HRG). These options will serve as their insurance against Lightsquared’s possible bankruptcy because they enable investors to sell shares at predetermined higher prices, even in the event of a bankruptcy. Another good thing about this approach is the fact that it doesn’t require investors to get out of Harbinger completely. By hedging with put options, investors limit their downside while still being able to reap potential profits if Lightsquared Inc. gets the FCC to rule in their favor.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!