You didn’t expect Phil Falcone to take LightSquared’s bankruptcy lying down did you? Bloomberg reports that he’s found a new source of financing to get him through these rough times, Michael Dell.From Bloomberg:
Harbinger Capital Partners Master Fund I Ltd. entered into a note purchase agreement on June 14 with a credit fund run by MSDC Management LP, according to a June 18 regulatory filing. MSDC Management is an investment adviser backed by MSD Capital LP, the private investment firm for Dell and his family.
The embattled hedge funder and founder of Harbringer Capital has had a rough year. He invested $3 billion in LightSquared, a telecom start-up, only to have FCC regulators call it a no-go. The company then delcared bankruptcy, and Falcone got a $190 million loan from Jefferies — but that financing came with a 24% interest rate. This new loan will replace that one.
So we imagine Falcone’s relieved about this deal.
MSD Capital, founded in 1998 to handle Dell family’s wealth, had gross assets of $4.44 billion at the end of last year. Its Credit Opportunity Fund invests in “distressed, stressed, special situation and event-driven value opportunities,” has $1.79 billion AUM.
Here’s more on the terms of the loan (from Bloomberg):
In a letter dated June 15, Harbinger Capital laid out the terms of an exchange option in which MSD HMF Investments LLC, an affiliate of MSD Credit, could swap loan advances for Harbinger Group shares held by Falcone’s hedge fund. As of June, Falcone and his affiliates, including Harbinger Capital, held a 69 per cent stake in Harbinger Group comprised of 129.86 million common shares.
Under the agreement, MSD HMF can buy the Harbinger Group shares at $6.50 each until June 2013, with the price moving to $7 during the following year of the loan. The maximum amount of advances that MSD HMF can exchange for shares is $50 million, which would equal a 5 per cent stake in the holding company. It can also exchange advances to Harbinger Capital for other securities the hedge fund owns.