LightSquared Inc. filed for bankruptcy, saying it will seek to resolve the concerns of U.S. regulators who thwarted the company’s plan to deliver high-speed wireless to as many as 260 million people.

LightSquared, based in Reston, Virginia, listed assets of $4.48 billion and debt of $2.29 billion as of February 29 in a Chapter 11 filing today in U.S. Bankruptcy Court in Manhattan. The filing followed intense negotiations with creditors, who had requested that the company’s backer, Philip Falcone, step aside. Falcone and the current management team will remain with the company, Terry Neal, a LightSquared spokesman, said today.

Bankruptcy “is intended to give LightSquared sufficient breathing room to continue working through the regulatory process that will allow us to build our 4G wireless network,” Chief Financial Officer Marc Montagner said in a statement.

Harbinger Capital Partners, Falcone’s New York-based hedge fund, had invested about $3 billion in LightSquared and owned about 74 percent of it as of Jan. 27. Falcone also had served on LightSquared’s board. Creditors asked for Falcone’s departure when they gave the company a weeklong extension on April 30 to stave off a default and keep trying to renegotiate its debt, according to a person with knowledge of the matter.

‘Quick Profit’

“Today’s filing was not an option the company embraced quickly or easily, but it was necessary to protect LightSquared against creditors who were looking for a quick profit,” Falcone said in a statement. “We remain committed to our original mission, and I remain steadfast in my belief that a path forward exists that will satisfy and benefit all constituencies.”

LightSquared last week received a second weeklong extension from creditors, delaying a potential bankruptcy, a person with knowledge of the matter said at the time. Bondholders, including Carl Icahn, Andrew Beal and David Tepper earlier gave Falcone a deadline of April 30 to revisit a waiver that avoided triggering a technical default on its debt.

Icahn sold his $250 million in LightSquared debt holdings, Reuters reported May 6. Icahn received about 60 cents on the dollar for the holdings on May 3, after originally paying about 40 cents on the dollar months earlier, Reuters said, citing unidentified sources. Dish Network Corp. (DISH) Chairman Charlie Ergen, meanwhile, acquired $350 million of the debt, the New York Post reported.

FCC Approval

Falcone’s plan for LightSquared depended on winning Federal Communications Commission approval to convert airwaves originally designated for satellite service to spectrum for land-based radio towers. LightSquared invested $4 billion in airwaves and reached deals with more than 30 partners, including Best Buy Co. (BBY)

LightSquared hit a roadblock in February when the FCC said it would withdraw preliminary approval for the company’s network after government tests found that the signals would interfere with global-positioning systems.

The decision followed a yearlong lobbying fight between LightSquared and GPS users and providers. The Coalition to Save Our GPS, a group formed to oppose,sg LightSquared’s plans, included package shippers FedEx Corp. and United Parcel Service Inc. (UPS), GPS-unit maker Garmin Ltd. (GRMN) and farm-gear maker Deere & Co. (DE)

Falcone said April 4 that he was considering bankruptcy for LightSquared, though he would rather get the government to swap his spectrum for that controlled by the U.S. Defense Department.

‘Continue Our Vision’

A voluntary filing would provide time to “continue with our vision, build the network and protect the company from creditors who are more interested in a quick flip,” Falcone said in an April 5 statement.

The company’s Canadian and Bermudan affiliates also filed for court protection today. LightSquared employed 168 people in the U.S. and Canada, according to court papers. The company said its satellite business, with 300,000 users, generated revenue of about $30 million a year.

LightSquared’s biggest unsecured creditors include Boeing Satellite Systems Inc., owed $7.5 million, and Alcatel-Lucent, owed $7.3 million.

Debt includes $322.3 million outstanding on a term loan with U.S. Bank NA as agent and $1.7 billion outstanding under a credit facility with UBS AG and Wilmington Trust FSB as agents.

Harbinger Investment

Harbinger’s main hedge fund, Harbinger Capital Partners Master Fund I, had $1.07 billion invested in LightSquared’s debt and equity as of Jan. 27, according to documents seen by Bloomberg News. The documents detailed a $190 million loan Harbinger took from securities firm Jefferies Group Inc. on Jan. 30 while it still awaited news from the FCC.

Harbinger’s $190 million loan, made at a 15 percent interest rate, was almost triple what the riskiest corporate borrowers pay. The loan would default if the FCC revoked its license on a final basis, and the license was no longer subject to review by the FCC or any court, according to the papers.

Trouble for the company began in December, when a draft summary of test results showed that LightSquared signals interfered with about 75 percent of GPS receivers. That same month, billionaire Icahn, along with Beal and Tepper, bought $300 million of the company’s debt sold by Farallon Capital Management LLC, two people told Bloomberg News.

‘No Mitigation’

The National Telecommunications and Information Administration advised the FCC on LightSquared’s proposed system. In February, NTIA’s administrator sent a letter to the FCC chairman saying there were “no mitigation strategies that both solve the interference issues and provide LightSquared with an adequate commercial network deployment.”

The opinion to block the approval caused a cascade of events for LightSquared. On March 16, Sprint ended an 11-year agreement to build, operate and share the network and compete with AT&T Inc. and Verizon Wireless. LightSquared paid Sprint $310 million in advance and Sprint said in a securities filing Feb. 27 that it would return $65 million of the payments.

LightSquared had originally agreed to pay Overland Park, Kansas-based Sprint $9 billion for the network duties and issue an additional $4.5 billion in service credits. The deal hinged on approval from the FCC.

On Feb. 28, Chief Executive Officer Sanjiv Ahuja resigned and the company appointed Falcone to the board as it began a search for a new CEO. LightSquared also cut 45 percent of its 330-member staff to preserve cash.

Since then, LightSquared failed to pay a network partner Inmarsat Plc $29.6 million due March 31. The company previously skipped a payment of $56.3 million due in February. LightSquared says it withheld payment because work specified in the contract wasn’t completed.

Falcone began investing in LightSquared’s predecessor, SkyTerra Communications Inc., in 2005. Harbinger wrote down the value of its LightSquared position by 59 percent last year because of concerns about winning regulatory approval.

The case is In re LightSquared Inc., 12-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Michael Bathon in New York at mbathon@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net