LightSquared Lenders Pressure Falcone

Some of LightSquared Inc.'s lenders want hedge fund manager Philip Falcone to step aside as the public face of the wireless communications firm as a condition for avoiding a looming debt default, said people familiar with the matter.

The lenders are in talks with representatives of Falcone, the founder of Harbinger Capital Partners LLC and LightSquared's main backer, over possibly extending a waiver on debt-term violations that expires Monday, the people said.

If Falcone doesn't agree to eventually leave LightSquared's board and make way for new executives and directors at the wireless communications firm, lenders are likely to balk and the company could end up filing for bankruptcy protection, they said.

Law firm Weil, Gotshal & Manges is negotiating with the lenders on behalf of LightSquared's equity holders, the people said. Law firm Milbank, Tweed, Hadley & McCloy would likely serve as bankruptcy counsel for LightSquared if the company ends up seeking Chapter 11 protection, the people said.

Success by the lenders would represent the latest blow to Falcone, who has spent several years plowing money into LightSquared in the hopes of creating a next-generation wireless network.