LightSquared Gets New Extension

Lenders to Philip Falcone's LightSquared Inc. agreed to give the wireless start-up another one-week extension when a waiver on debt-term violations expires Monday, said people familiar with the matter.

The extension, the second since the waiver expired April 30, would give Mr. Falcone extra time to consider a tentative proposal to have him eventually give up his board seat and at some point take a less public role in the company's efforts to build out a nationwide high-speed mobile broadband network.

If the hedge-fund manager cannot reach an agreement with lenders, he has said he may seek bankruptcy protection for LightSquared.

Mr. Falcone's plans to roll out a new wireless network have been stymied by regulators who say they will seek to block it over concerns the airwaves interfere with Global Positioning System signals.

Mr. Falcone heads hedge-fund Harbinger Capital Partners.

He has sunk billions of his and his investors' money into LightSquared with the goal of competing with AT&T Inc., Verizon Wireless and others in selling wholesale wireless service.

The extension could be the final reprieve before Falcone and LightSquared's lenders either reach a deal or face off in bankruptcy court, said a person familiar with the matter.

The two sides are continuing to negotiate a number of details in the hopes of reaching a broader deal. The lenders want to participate in any upside should LightSquared end up tackling its problems and become successful, according to people familiar with the matter. To that end, the two sides are discussing ways to restructure LightSquared in a way that could eventually give the lenders equity in the company, the people said.

Lenders have continued to propose so-called "bankruptcy-remote" measures that would make it difficult for LightSquared to seek Chapter 11 protection at a later date, the people said. One of the proposals is to have Mr. Falcone be held personally liable should it be found he caused or influenced a decision by the company to seek bankruptcy protection at a later date, the people said. That liability would involve Mr. Falcone essentially writing a $1.7 billion check to pay back the lenders' debt, the people said.

The proposal has been non-starter for Mr. Falcone, the people said. People close to Mr. Falcone said he wouldn't agree to such a term if he's no longer on LightSquared's board or making any key decisions for the company.

Write to Greg Bensinger at greg.bensinger@dowjones.com and Mike Spector at mike.spector@wsj.com