LightSquared, the proposed US 4G wholesale network, could run out of money by the second quarter of next year unless it is able to raise fresh capital, according to financial documents seen by Reuters. The liquidity crisis could see it postpone the launch of its network or be forced to sell off some assets.
"There is a need to raise substantial capital beyond the beginning of the second quarter of 2012 in order to have sufficient liquidity," the company said in the financial statement, reportedly noting that it may not be able to "continue as a going concern" without further financing.
LightSquared’s main backer is Philip Falcone's US$5 billion Harbinger Capital Partners hedge fund, which has reportedly pumped over US$3 billion in equity and loan commitments into the venture to date.
LightSquared recorded a US$427 million net loss during the first nine months of this year. Although the firm has signed up several wholesale partners the network has still yet to launch, which meant it generated just US$30 million in revenue during the nine month period.
A spokesperson told Reuters that the start-up "has cash through the next several quarters." However, the financial statement notes that in the next year LightSquared has "significant cash commitments" including making a US$500 million to US$700 million payment to its network partner Sprint Nextel and making US$310 million in payments to its debt holders.
"If the company fails to obtain the necessary financing on a timely basis, the execution of the company's business strategy could be materially delayed, costs could materially increase or the company may have to discontinue operations or seek a purchaser for the business or assets," according to the financial document.
According to Reuters, LightSquared assets are valued at US$4.64 billion, around half of which relate to its spectrum holdings.