The details of Harbinger Capital’s Phil Falcone’s most recent loan bears possible bad omen for the hedge funder.Before we get to that, though, remeber:
Falcone has made headlines recently for his role as major backer for the embattled telecomm venture Lightsquared—he has nearly half his fund’s AUM invested in the firm—and for his fund’s terrible performance as a result. As Lightsquared waits for FCC approval for commercial use, rumours are rampant that the firm may face bankruptcy if it is not greenlit—there have been various reports stating that Lightsquared’s satellite system interferes with GPS—and speculation is high on what fate may await Falcone as a result.
Now, Bloomberg is reporting that Falcone has to pay 15% on a $190 million loan he received from Jefferies—a rate that is about triple what the highest risk borrowers pay. That says a lot about industry confidence in Falcone’s project. It also brings up the question—what does Falcone need that loan for?
The premium Falcone’s hedge fund must pay to borrow money illustrates just how risky lenders view his biggest wager. His main Harbinger Capital Partners Master Fund I has more than 60 per cent of its assets invested in LightSquared Inc., a Reston, Virginia-based firm that plans to build out a network offering high-speed data service to as many as 260 million people.
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