Unstructured Finance

LightSquaredHarbingerCapital Inc.

By Matthew Goldstein

It’s no secret that LightSquared and Phil Falcone’s Harbinger Capital Partners long have been joined at the hip–especially since the $5 billion hedge fund is the wireless telecom’s biggest equity investor. And a recent financial statement for the Falcone-backed start-up makes it clearer than ever just how closely linked are the fortunes of LightSquared and Harbinger.

As we reported, the LightSquared document reveals that on July 1 the company got $263.8 million in new financing, of which $183.8 million came from hedge funds controlled by Harbinger and Falcone. The hedge fund is getting 2.9 million in warrants to purchase additional shares in LightSquared, which is facing the prospect of running-out of cash during the second-quarter of 2012.

On July 5, LightSquared issued a press release trumpeting that it had just secured $265 million in additional financing. The press release said the “capital was drawn from both existing investors as well as new investors in the company.” But it made no mention that more than 60 percent of the new source of funds was coming from Harbinger-controlled hedge funds. (The other unnamed “lenders” also got 1.3 million warrants to buy LightSquared shares).

Now maybe everyone assumed that Harbinger was once again the deep-pocket for LightSquared. But the press release gave the impression that the company was making headway in expanding its investor base.

The July 5 press release also came at a critical time for LightSquared as it had just secured a long-term networking deal with Sprint. The financing news also came as complaints about how LightSquared’s broadcast spectrum interfered with GPS devices began to mount.

Phil Falcone’s ray of sunshine

By Matthew Goldstein

Leave it to Phil Falcone to find a glimmer of good news to relay to the beleaguered investors in his Harbinger Capital Partners. A day after U.S. securities regulators threatened to sanction the billionaire hedge fund manger for alleged trading irregularities, Falcone told investors in his roughly $4 billion firm that not all is lost.

In a note emailed to investors the day after Falcone officially learned the U.S. Securities and Exchange Commission is considering charging him with a number of securities law violations, the former Harvard hockey star told them that nothing the SEC is looking at involves his beloved LightSquared.

Additionally, it is important to note that neither Harbinger Group Inc. (“HRG”) nor LightSquared were the recipient of a Wells Notice, nor was either involved in any of the events being investigated.  Moreover, the Wells Notices received by HCP and certain affiliates are not related to any of the HCP funds’ investments in HRG, LightSquared or their predecessors.

Lightsquared loans suffer from interference

By Matthew Goldstein

It looks like the problems that Phil Falcone’s upstart wireless network may cause with some airline navigation systems may be impacting the price of the more than $1 billion in high-yield debt LightSquared has sold to hedge funds and mutual funds.

Over the past two weeks, the prevailing market price of LightSquared”s four-year term “junk” loans has slumped to about 95 cents on the dollar. That’s still a solid price for the high-yield offering that carries a 12 percent coupon. But it’s down considerably from late May, when the loans were fetching as much as 102 cents on the dollar.

LightSquared’s loans soared in the spring amid optimism that the prospects were looking good for the planned high-speed wireless network backed by Falcone and his Harbinger Capital Partners hedge fund. The optimism was fed by talk of a LightSquared initial public offering later this year, an infrastructure sharing agreement with telecom giant Sprint and a perceived increase in the value of its spectrum holdings.

Falcone really loves LightSquared

By Matthew Goldstein

Phil Falcone’s love for all things wireless and his upstart telecom company called LightSquared is well-known. Indeed, he’s gambled the future of his Harbinger Capital Partners hedge fund on LightSquared being a commercial success.

Earlier this week, we reported that Falcone was planning to deal with the high-level of redemptions at his hedge fund by giving withdrawing investors “shares” in LightSquared as an alternative to outright cash. Here’s Falcone telling investors why he is so bullish on bringing 4G high-speed wireless technology to the masses:

LightSquared’s success over the past year underscores my view of the inherent value of this asset to our investors. Moreover, the tangible progress LightSquared is making in its commercial and strategic relationships further reinforces my belief that LightSquared is an investment capable of generating enhanced returns over time. While we have had opportunities to monetize a portion of our LightSquared position in recent months, I feel strongly that any sale by our funds of an interest in LightSquared would have been premature and would not only have jeopardized the ability to join forces with a strategic partner, but also would have limited the substantial upside that I am convinced will come to all of our investors as our plan is executed.

  •