NEW YORK (Reuters) - Creditors of hedge fund manager Philip Falcone's telecom start-up LightSquared have agreed to extend talks a second week, avoiding a default for now on about $1.6 billion of debt, according to a source familiar with the matter.
The person, who asked not to be named, said on Sunday that talks could continue until May 14 as LightSquared's debt holders had agreed to extend the deadline.
The person would not comment on specifics around the talks between LightSquared and the creditors, which have been negotiating to restructure LightSquared's 96 percent ownership by Falcone's Harbinger Capital Partners.
Debt holders, including billionaire investor Carl Icahn and hedge fund manager David Tepper, had initially threatened to declare a default on the loan, which would have forced a bankruptcy, if there was no agreement by April 30. Last week, they extended that deadline until May 7.
A spokesman for Harbinger was not immediately available to comment on the extension.
LightSquared's future was thrown into doubt in February after the U.S. Federal Communications Commission said it would revoke the start-up's permission to build a high-speed wireless network because tests had shown that it would risk interfering 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'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; Editing by Maureen Bavdek