Hedge Fund Harbinger Capital Adds Convertible Bonds ~ market folly

Thursday, February 11, 2010

Hedge Fund Harbinger Capital Adds Convertible Bonds

Philip Falcone's hedge fund Harbinger Capital Partners has filed an amended 13G with the SEC on shares of Mercer International (MERC). In the filing, we learn that Harbinger has a 10.94% ownership stake in MERC with 4,201,527 shares. Do note that this total includes shares they are eligible to obtain upon the conversion of convertible bonds. As per their last 13F filing which detailed positions as of September 30th, 2009, Harbinger previously owned 1,995,100 shares of Mercer. So, we see that they have added 1,973,333 shares via exposure through convertible bonds somewhere over the past four months. Digging into their separately filed SEC Form 3, we discover that Harbinger purchased the 8.5% convertible notes due in October 2012.

In terms of other recent activity out of Harbinger, we saw that they have been selling Calpine (CPN) and in early January we covered Harbinger's three new positions. After having a dismal 2008, Harbinger had a great showing last year as they finished up 46.5% as we noted in our 2009 hedge fund performance numbers post. Falcone runs a series of hedge funds focused on distressed plays and concentrated equity positions.

Taken from Google Finance, Mercer International "operates in the pulp business and is a producer of market northern bleached softwood kraft (NBSK) pulp. The Company’s operations are located in Eastern Germany and Western Canada. It operates three NBSK pulp mills with a consolidated annual production capacity of approximately 1.5 million million air-dried metric tons (ADMTs)."

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