And so the legend of the once invincible "hedge fund titan" Phil Falcone, often the target of mockery and ridicule on the pages of Zero Hedge, ends, after his now irrelevant hedge fund which peaked in the tens of billions back in 2006/2007 is forced to borrow a secured loan from Jefferies at a 15% rate. The reason - the firm's all in gamble in satellite communication company LightSquared, which is also pretty much finished following today's announcement by airline carriers who said that LightSquared would "ruin US aviation." That, and pretty much everything else that Falcone invested in in the past 5 years. Check and mate. This also answers our question from August 2010 "Is Phil Falcone's Mega Bet On [LightSquared] Going To Be His Last?" It is.
Billionaire Phil Falcone’s hedge fund, which tumbled by almost half last year because of a troubled wireless venture, is paying a 15 percent interest rate for a $190 million loan, almost triple what the riskiest corporate borrowers pay, said two people with knowledge of the loan. The loan is backed by all of the fund’s assets, according to the people. In addition to LightSquared, they include a 27 percent stake in Ferrous Resources Ltd., an iron-ore producer in Brazil, and a 54 percent stake in Spectrum Brands Holdings Inc., a Madison, Wisconsin-based manufacturer of batteries and pet food. If any assets are sold, Jefferies gets paid first, according to the people, and the lender has the right to help sell some of the assets at an agreed upon minimum price.
Falcone borrowed the money from Jefferies Group Inc. after paying off a $400 million loan from UBS AG on Jan. 30. Falcone received $160 million from New York-based Jefferies after fees, and will pay an annualized rate of 15 percent on the loan, which matures on Oct. 31, according to the people, who asked not to be identified because the fund is private. Interest on the loan will be paid monthly.
The premium Falcone’s hedge fund must pay to borrow money illustrates just how risky lenders view his biggest wager. His main Harbinger Capital Partners Master Fund I has more than 60 percent of its assets invested in LightSquared Inc., a Reston, Virginia-based firm that plans to build out a network offering high-speed data service to as many as 260 million people.
LightSquared is awaiting final clearance from the Federal Communications Commission as regulators weigh test results that show the service’s signals disrupt global-positioning system equipment used by cars, tractors, boats and planes.
LightSquared argues that technical solutions exist to resolve the interference and GPS manufacturers should have planned to accommodate the firm’s use of the spectrum.
Things could always be worse though: Phil could be paying 500%, the same as Greece. For that however, he would have to pledge, most sternly, that LightSquared would be profitable as soon as 2013 though... And of course, Phil still has the missus.