Under the financing agreement, the MSD credit fund can swap as much as $50m of loans extended to Falcone‚??s Harbinger Capital for part of its stake in Harbinger Group Inc., his publicly traded investment vehicle. Harbinger Group has served as a source of capital for Falcone, raising about $400m last year through the sale of convertible preferred stock to investors such as Fortress Investment Group LLC, George Soros‚??s Quantum Partners LP, and James Litinsky‚??s JHL Capital Group LLC, according to federal filings.
The new loan replaces a loan, originally for $190m, that Harbinger Capital received Jan. 31 from Jefferies Group Inc. (JEF), according to the SEC filing and New York state corporate records. Harbinger Capital had already paid down about $82m of the Jefferies loan, which was scheduled to mature in October and carried an annualized interest rate of 24 percent, more than four times the rate paid by corporate borrowers with non-investment-grade credit ratings as of January.
At the end of January, Harbinger Capital Partners had invested about $3bn, equaling about 60 percent of its assets, in LightSquared Inc., a Reston, Virginia-based firm that planned to build out a network offering high-speed data service to as many as 260 million people. In February, the National Telecommunications and Information Administration recommended that the Federal Communications Commission withdraw the license for the company‚??s network, after finding that its signals would interfere with global-positioning systems.