Harbinger Permanent Capital Vehicle Raises $350M

Dec 1 2010 | 10:17am ET

Unlikely to get a new loan from his own hedge fund anytime soon, and burned by redemptions stemming in part from the one he did get, Harbinger Capital Partners' Philip Falcone has hit upon new ways to raise money, for both business and pleasure.

On the business front, Falcone's Harbinger Group raised $350 million earlier this month in a bond sale. The Harbinger Group shell company was created last year when three Harbinger hedge funds bought a majority stake in an inactive oil drilling company Zapata.

Falcone plans to use the proceeds from the debt sale to fund long-term investments in agriculture, telecommunications and other sectors.

The five-year, 10.625% coupon bonds are backed by the Harbinger funds' stake in Spectrum Brands, which is now owned primarily by Harbinger Group. In exchange, the Harbinger hedge funds have received additional Harbinger Group stock.

The New York-based hedge fund denied that the shell company deal had anything to do with investor redemptions, sparked both by $113 million loan Falcone took from the hedge fund to pay a tax bill and by investor concerns over the $9 billion firm's huge investments in illiquid wireless and telecommunications companies.

"Harbinger Group Inc. was not acquired to be a mechanism to deal with Harbinger Capital fund redemptions," a Harbinger spokesman told Bloomberg News. "Rather, HGI is a permanent capital vehicle to house longer-term controlling equity stakes in companies that operate across a diversified set of industries."

Falcone has denied that Harbinger will have trouble meeting the redemption requests.

Meanwhile, Falcone and his wife have found a new lender following the uproar over his loan from Harbinger. The two have borrowed an unspecified amount from Bank of America. The Falcones put up a chunk of their impressive art collection, blandly described as "certain items of fine art" in a regulatory filing, as collateral.

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