This afternoon, Harbinger filed another Form 4, which detailed its continued sales of TerreStar Corporation’s common stock, where it has sold a total of 37.4M common shares since October 22, and the purchases of 6.5% Exchangeable Notes in its Blue Line Fund, where it has now acquired $31.55M (in face value) of these Notes. As of June 30, Harbinger’s Master Fund held 31.6M shares of TerreStar Corporation and its Special Situations Fund held 11.6M shares of TerreStar Corporation. As a result, it appears that Harbinger has now disposed of nearly all of its common equity interests in TerreStar Corporation, and currently owns just 3.7M shares of common stock.
The Form 4 also indicates that Harbinger still has a beneficial ownership of 37.05M shares in the Master Fund and 10.33M shares in the Special Situations Fund, which includes the conversion rights associated with Harbinger’s exchangeable note and preferred stock holdings, plus its Series E holdings (equivalent to 30M shares of common stock). Based on Harbinger’s prior ownership of one third of the $178.7M in Exchangeable Notes, this would equate to beneficial ownership of 10.7M common shares, while its Series B preferred stock holdings presumably account for the balance of 3M shares (which would equate to holding $100M in face value of Series B preferred stock at the designated exchange ratio of $33.33 per share).
With its recent Blue Line purchases, Harbinger now appears to have acquired control of a majority of the TerreStar Networks 6.5% Exchangeable Notes, although it has had to pay a significant premium to do so (paying 82 cents on the dollar for its most recent purchases, compared to 43 cents when it started buying). Harbinger has also disposed of most of its holding in the TerreStar Purchase Money Credit Facility, with MAST Capital Management now holding 47% of the $85.9M in outstanding loans and presumably Harbinger therefore only holding 3% of the loan. Thus Harbinger’s position is now effectively concentrated in the Exchangeable Notes at TerreStar Networks and the Series B and Series E Preferred Stock at TerreStar Corporation, so it will interesting to see how this impacts its future actions in the TerreStar bankruptcy.