Hedge Fund Harbinger Capital Files 13D on Spectrum Brands (SPEB) ~ market folly

Friday, September 18, 2009

Hedge Fund Harbinger Capital Files 13D on Spectrum Brands (SPEB)

In an SEC filing made due to activity on August 28th, 2009, Philip Falcone's hedge fund firm Harbinger Capital Partners has disclosed a 42% ownership stake in Spectrum Brands (SPEB). Their 13D shows that they now own 12,604,216 shares.

This filing is interesting because it details how SPEB filed for reorganization relief under Chapter 11 bankruptcy back in February. Then just recently back in late August the plan became active. When this occurred, SPEB's old common stock and their various notes (some of which Harbinger owned) were deemed surrendered and exchanged for an aggregate of 11,405,281 shares to Harbinger. SPEB then issued an additional 2,970,000 shares to participants in a supplemental loan to the issuer in consideration for their participation. Due to their participation, Harbinger received a total of 1,198,395 additional shares. This brings you to the grand total of shares listed at the beginning of this article. This 13D is unique in that it gives us a glimpse as to how Phil Falcone has gone back to his distressed roots and invested Harbinger's capital in such a transaction. Check out the rest of Falcone's holdings in an article where we recently covered Harbinger's portfolio.

We also want to highlight that fellow hedge fund D.E. Shaw & Co recently filed a 13G on Spectrum Brands as well. In their filing, David Shaw's firm disclosed they now have a 14% ownership stake. So while D.E. Shaw has opted for a passive stake with their 13G, Harbinger's filing is a 13D and has represented an activist stake where they can press for change at the company.

Harbinger Capital Partners is a $6 billion hedge fund ran by Philip Falcone. While Harbinger deals in equity markets, Falcone's roots are in distressed investing and he is opening a new fund to return to these roots. His investment style focuses on bankruptcies (as evidenced above), proxy fights, and intensive research on credit. Since their equity positions are easily tracked via SEC filing, we've kept tabs on their moves in this regard for some time now. In terms of recent activity, Harbinger has been decreasing their position in Cliffs Natural Resources (CLF), dumping some of their Calpine (CPN), and most recently amended their 13D on SkyTerra. Last, but certainly not least, they've also been selling shares of Solutia (SOA) as if it were going out of style.

Taken from their company website, Spectrum Brands includes brands such as 8 in 1, Cutter, Jungle Labs, Rayovac, Remington, Schultz, and more.

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