LightSquared edges closer to bankruptcy filing: sources

(Reuters) - Philip Falcone's telecom start-up LightSquared edged closer to a bankruptcy filing on Sunday as the hedge fund manager was far from an agreement with creditors, sources familiar with the matter said.

Falcone has until Monday at 5 p.m. EDT (2100 GMT) to reach an agreement or face a default on a $1.6 billion loan, sources said.

Creditors have been negotiating to restructure LightSquared's 96 percent ownership by Falcone's Harbinger Capital Partners.

"The bondholders are asking for conditions they know Harbinger and Phil cannot agree to," said a source close to the situation.

Falcone did not respond to a request for comment. Representatives for Harbinger and LightSquared declined to comment on Sunday.

Debt holders could have declared a default on the loan, which would have forced a bankruptcy, if there was no agreement by April 30. The deadline has been extended twice.

LightSquared's future was thrown into doubt in February when the U.S. Federal Communications Commission said it would revoke its permission to build a high-speed wireless network as tests found risks of interference with Global Positioning Systems.

These systems support crucial services such as aviation safety and military systems as well as devices used in industries such as construction and agriculture.

LightSquared creditors have included hedge fund manager David Tepper, billionaire investor Carl Icahn and hedge funds including Fortress Investment Group , Knighthead Capital Management, Redwood Capital Management and investment firm Capital Research and Management Co.

Icahn recently sold his $250 million position in the company for a profit, according to sources.

"From the start, it didn't appear they weren't negotiating in good faith. It seemed as if they were only interested in seeing if they could force Phil to hand them control of the company so they could flip it for a quick profit," the source close the situation said.

"Despite this feeling, Phil and the Harbinger team continue to try to see if there is some middle ground. But it appears only one side wants a deal," the source added.

LightSquared's fate has become an important concern for investors in Falcone's $3.8 billion hedge fund, which has sunk some 60 percent of its money into the telecom startup.

Last year, Harbinger posted a 47 percent decline in value, largely because of a write-down on the value of the fund's LightSquared investment.

(Reporting By Sinead Carew and Matthew Goldstein, additional reporting by Lynn Adler; Editing by Marguerita Choy)

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