Harbinger exits Inmarsat

Harbinger Capital Partners has sold its remaining 14% stake in mobile satellite operator Inmarsat.
The hedge fund offloaded 64,277,249 ordinary Inmarsat shares at 670 pence per share raising gross proceeds of approximately £431m. The shares were held…

Harbinger Capital Partners has sold its remaining 14% stake in mobile satellite operator Inmarsat.

The hedge fund offloaded 64,277,249 ordinary Inmarsat shares at 670 pence per share raising gross proceeds of approximately £431m. The shares were held by the Harbinger Capital Partners Special Situations Fund and Harbinger Capital Partners Master Fund.

The timing of the transaction is due to the cessation of the 180 day lock-up arrangement between Harbinger and joint bookrunners Credit Suisse and UBS following the initial stake sale back in October 2010. That deal saw Harbinger, which first invested in Inmarsat in 2007, sell just over half its 28% holding, around 65 million shares, for £410m.

The exit completes the hedge fund’s volte-face in its strategy towards Inmarsat. Back in mid-2008, Harbinger announced its intention to seek to acquire the MSS operator through its US subsidiary SkyTerra. At the time, no formal terms of an offer were set as regulatory approval was sought first, a process that was expected to take around 12 to 18 months. However, in the interim, Harbinger shifted its satellite investment focus to its LightSquared project in North America and away from its proposed purchase.

With LightSquared having triggered both the L-band cooperation and spectrum leasing agreements with Inmarsat, Harbinger no longer had a strategic need to maintain its holding in the latter.

As to what Harbinger will do with its US$841m in proceeds, some industry analysts have speculated that it will be used to help fund the roll out of LightSquared’s hybrid satelliteterrestrial LTE network in the United States. However, that project recently secured a US$586m term loan, meaning that is has raised more than US$2bn in debt and equity funding, so whether it needs additional capital to meet the FCC’s rigorous construction timetable and launch commercial services remains to be seen.

Another possibility is to fund the hedge fund’s battle to take control of Terrestar Networks, which is currently in Chapter 11 bankruptcy protection. Terrestar’s management has already agreed to a pre-pack restructuring agreement with EchoStar but Harbinger has been snapping up the satellite operator’s 6.5% senior exchangeable PIK notes in a series of transactions.

As for Inmarsat, the share sale has been viewed by many analysts as ridding the company of a significant overhang.

While the company’s share price has continued to rise since Harbinger’s original stake sale, by around 13%, market expectation over Harbinger’s eventual exit has curtailed that growth somewhat.