Hedge Funds

Cash That Won't Flee


The Shell Company

Falcone's Harbinger Capital Partners paid $74 million for a 51.6 percent stake in Zapata, a onetime oil driller with no operations that is listed on the New York Stock Exchange. It reincorporated as Harbinger Group in December 2009.

The Funding

Harbinger's hedge funds plan to give Harbinger Group most of their stake in publicly traded Spectrum Brands, in exchange for additional stock in Harbinger Group. The funds will end up owning 93 percent of Harbinger Group, which will hold Spectrum Brands shares worth about $767 million.

The Bond Sale

In November, Harbinger Group sold $350 million of five-year bonds yielding 11 percent, backed by the Spectrum Brands shares it is getting from the Harbinger funds.

The Strategy

According to filings, Falcone will use Harbinger Group's cash and ability to issue stock to buy "controlling equity stakes" in companies that operate in six industries: consumer products, insurance and financial products, telecom, agriculture, power generation, and water and natural resources.


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