Carl Icahn, known for investing in undervalued or underperforming companies, has sold his $250 million debt holdings in the possibly doomed wireless service LightSquared.

The news was reported exclusively by Reuters, which added that the company is still negotiating with its creditors to avoid defaulting on its $1.6 billion of debt.

LightSquared is 96 percent owned by Philip Falcone’s Harbinger Capital Partners. According to Reuters, Icahn (pictured) had been pushing to reduce Falcone’s involvement.

In related news, the company’s other lenders have agreed to grant a second extension on LightSquared’s debt-term violations that expired today (May 7).

It all started so optimistically. LightSquared’s ambitious plan is to create a high-speed wireless network on a band of the spectrum it controls. Its progress has been blocked by the Federal Communications Commission on grounds that its operations will interfere with essential services, a determination based on evidence and testimony from the U.S. military and the GPS industry.

Related links:

Reuters – Exclusive: Icahn sells LightSquared debt, creditors extend talks: sources

Wall Street Journal – LightSquared Gets New Extension

Bloomberg – Icahn’s Departure Doesn’t Ease Falcone’s LightSquared Woes

The Icahn Report – official site

LightSquared – official site