Ligado Networks has announced its filing for Chapter 11 bankruptcy. This strategic move, made public in a press release yesterday, is part of a comprehensive restructuring plan aimed at reducing the company’s staggering debt from $8.6 billion to approximately $1.2 billion. The restructuring is largely underpinned by a new agreement with AST SpaceMobile, a company focused on providing cellular connectivity via satellite technology.

The mechanics of the restructuring revolve around critical financial support from creditors holding around 88% of Ligado’s debt. According to Ligado’s statements, these creditors have committed to providing an additional $115 million in incremental financing to facilitate the restructuring process. The bankruptcy proceedings have been filed in the U.S. Bankruptcy Court for the District of Delaware, marking the next chapter in a saga that has seen the company hint at potential bankruptcy since last year.

Ligado’s struggles are intricately linked to its controversial battles with the Department of Defense (DoD) and the Department of Commerce over its L-band spectrum license, granted by the Federal Communications Commission (FCC) in 2020. Government agencies have long argued that Ligado’s ambitions to repurpose this spectrum for cellular communications pose a threat to critical GPS signals, relied upon by the military and various industries. Ligado has vehemently contested these claims, asserting it can operate effectively without disruption to GPS.

The recent partnership with AST SpaceMobile is noteworthy in this context. AST SpaceMobile plans to lease 45 MHz of Ligado’s mid-band spectrum, which has been at the heart of these disputes. According to telecommunications expert Tim Farrar, this arrangement is surprising given AST’s previous focus on collaborating with cellular operators and utilizing terrestrial spectrum. This pivot towards mobile satellite service (MSS) harmonizes with an urgent industry need to expand connectivity options, particularly in light of the increasing demand for reliable satellite services.

Ligado’s restructuring strategy includes not only the new partnership with AST but also potential operational shifts. Farrar predicts the company may separate this part of the business while maintaining its satellite in geosynchronous orbit to preserve its spectrum license and fulfill payment obligations to Viasat, a partner in satellite-to-cell services.

Despite the challenges ahead, Ligado has made it clear that it intends to continue its legal fight against the federal government. Doug Smith, Ligado’s president and CEO, reiterated the firm’s commitment to seek just compensation for what they claim to be the unlawful appropriation of its licensed spectrum.

The ongoing litigation could take on additional dimensions with the anticipated return of a Trump administration, which has historically been more sympathetic to the interests of the mobile telecom sector. Should such a scenario unfold, negotiations for a possible out-of-court settlement could come into play. The potential involvement of influential figures, such as newly-appointed advisors like Elon Musk, adds further complexity to the situation. Musk’s SpaceX, with its Starlink service, poses a competitive threat to AST’s initiatives and may weigh in on regulatory outcomes, making the stakes higher.

Complications are further exacerbated by the ongoing evaluations by the National Telecommunications and Information Administration (NTIA) concerning potential interference issues that could arise from Ligado’s direct-to-device capabilities. This study, initiated on December 17, aims to assess risks to GPS signals amid increasing competition for spectrum resources, emphasizing the need for a balanced approach to spectrum allocation.