LightSquared is reported to be preparing for bankruptcy protection, as negotiations with its creditors to avoid a debt default have hit stumbling blocks.

According to Reuters, while the troubled wholesale network business has previously received several waivers to prevent it going into default, its lenders are unlikely to do the same again – and the parties have until the end of today to reach an accord.

The current dispute appears to revolve around the ownership stakes in the venture and its management, and how these will develop in future.

The Wall Street Journal said that LightSquared’s creditors want the troubled business to be managed by an independent board which does not include hedge-fund manager Philip Falcone, who has been a driving force behind the unit.

However, it is a financial restructure which would have seen Falcone personally liable for future bankruptcy which proved the real sticking point – especially if he no longer has a position on the company’s board.

It was suggested that LightSquared will seek bankruptcy protection in an effort to prevent the company falling into the hands of investors who want to “flip” the company for a swift profit. Such a move would enable it to come up with a new plan to keep it as an operating entity.

Financial struggles aside, LightSquared received a blow early last month, when the US Federal Communications Commission withdrew its support for the company’s planned network – effectively meaning that it cannot operate.

The company has struggled with concerns that its planned network could interfere with some GPS receivers.