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

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

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!