Is Phil Falcone's Mega Bet On SkyTerra Going To Be His Last?
Phil Falcone, who rode the leverage wave into prosperity has fallen on hard times: according to a recent HSBC report, his fund was down 10.7% YTD, which has forced many people to reevaluate whether his "strategy" was anything more than gobbling up second liens and hoping for a cheap flip or for profitable debt-for-equity conversions. Now that the economy has moved back into a depression, his recent results may be far more indicative of his endogenous alpha generation "ability" than riding the levered beta wave of 2005-2007. Yet that did not stop him from pocketing $825 million in 2009, making him the 10th best paid manager according to Absolute Return + Alpha. What is even more troublesome for LPs is his latest megabet on SkyTerra Communications, now known as LightSquared. As Matt Goldstein at Reuters reports, "roughly $3 billion or 40 percent of Harbinger’s assets are tied-up in
LightSquared, say people familiar with the funds. Formerly known as
SkyTerra Communications, the telecom company is the hedge fund’s single
largest and most concentrated bet." While such a concentrated bet is appropriate for a distressed, event-driven fund, many are grumbling that should this latest venture prove as "successful" as his other recent ones, then Harbinger may soon become a footnote in the rich tapestry of blown up hedge funds. "We are being paid to be more skeptical these days and we are quite
frankly concerned by what he seems to be doing,” said a representative
for an institutional investor, as Goldstein reports. Yet having amassed a multi-billion personal empire that also includes Bob Guccione's former house on 5th Avenue, we somehow think that Phil will be good no matter how Harbinger's LPs end up doing.
For much more on Falcone latest, and hopefully not last, massive gamble, here it the full report by Reuters' Matt Goldstein and Svea Herbst-Bayliss (link to article here)