Harbinger Gets MSD Capital Loan

Jun 20 2012 | 12:21pm ET

Cash-strapped Harbinger Capital Partners has taken out a new loan—from an MSD Capital-affiliated credit fund.

The $1.78 billion MSD Credit Opportunity Fund and Harbinger's flagship hedge fund entered into a note-purchase agreement on Thursday, Bloomberg News reports. The deal gives MSD Credit the right to swap up to $50 million in loans for shares of Harbinger's publicly-listed permanent capital vehicle, Harbinger Group.

Unlike Harbinger's last credit lifeline, a $190 million loan from Jefferies Group that cost Harbinger an effective loan rate of 24%, terms of the MSD loan were not disclosed in the Monday regulatory filing. It is also unclear how much Harbinger borrowed.

Harbinger repaid $82 million of the Jefferies loan, which comes due in October, in April.

What is clear is that MSD HMF Investments, an MSD Credit affiliate, will be permitted to swap loan advances for Harbinger Group shares. MSD HMF can buy Harbinger Group shares at $6.50 apiece until next June and $7 each in the following year, up to a 5% stake in the vehicle.

Harbinger has been under siege since last year, as its largest investment, wireless Internet venture LightSquared, has suffered a series of setbacks, including the loss of its regulatory approval and a bankruptcy filing, which Harbinger chief Philip Falcone says will allow him to maintain control of the company. Harbinger has also suspended redemptions.

MSD Credit is managed by MSDC Management, set up three years ago to open MSD Capital's funds, previously available only to Dell founder Michael Dell and his family, to outside capital.

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