Harbinger May Lose Up to $200 Million on Navistar Swaps
BY DEALBOOKArticle Tools
Harbinger Capital Partners, the hedge fund run by Philip A. Falcone, may lose up to $200 million on bets that Navistar International’s stock would rise, Bloomberg News reports.
Harbinger bought swap contracts on 4.55 million shares of Navistar that would pay off if the truck maker’s shares rose above certain prices, according to a filing with the Securities and Exchang Commission. Navistar has dropped about 63 percent this year to below $20 a share, far less than the price where the trades would be profitable for Harbinger.
The unrealized Navistar losses could be reversed if Navistar’s stock rebounds. But that does not seem likely soon because of the depressed market for trucks, Walter Liptak, an analyst at Barrington Research Associates, told Bloomberg.
Harbinger would profit from the swaps, provided by Deutsche Bank andMonecor, a London-based company that sells derivatives, if Navistar’s shares rose higher than prices specified in the contracts. Harbinger must pay Deutsche Bank and Monecor if Navistar’s shares decline below the preset prices, which range from $48.21 to $69.95 a share.
Harbinger’s swap contracts are profitable at an average price of $63.33 a share, according to data in the Nov. 14 filing. Based on Navistar’s current stock price, the Harbinger’s Master Fund I and Special Situations Fund face about $198 million in losses.
The funds entered into most of the Navistar swaps between May and August 2007
Harbinger has the right to close the contracts at any time."
http://dealbook.nytimes.com/2008/11/18/harbinger-may-lose-up-to-200-million-on-navistar-swaps/
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