Aug 1, 2008 9:51 AM, By Donny Jackson

SkyTerra Communication and subsidiary Mobile Satellite Ventures (MSV) recently announced that the hedge fund Harbinger Capital Partners Funds has agreed to provide $500 million in debt financing, while Harbinger affiliates have signed an agreement addressing the structure of a possible merger of SkyTerra and Inmarsat.

With the $500 million financing commitment, SkyTerra and MSV can fund SkyTerra’s business plan through the third quarter of 2010. MSV hopes to launch its MSV-1 satellite—a satellite so large that services can be provided to devices with cell-phone-sized form factors and antennas—in late 2009 and a similar MSV-2 satellite during the latter half of 2010, SkyTerra CEO and President Alexander Good said during a conference call.

The Harbinger financing announcement came less three weeks after satellite builder Boeing agreed to defer $40 million in payments associated with the MSV-2 satellite. Together, these deals address a major concern regarding the ability of SkyTerra and MSV to fund its business plan, SkyTerra CFO Scott McLeod said.

“We appreciate that strong financial support of Harbinger, particularly in what are otherwise very challenging capital markets,” McLeod said.

Harbinger’s financing is not contingent on SkyTerra completing a deal for Inmarsat, and SkyTerra has the option of trying to secure better financing terms in the marketplace before the first $150 million tranche is excercised in January 2009.

Good said a possible deal with Inmarsat “makes a great deal of strategic and operational sense” by providing greater spectrum efficiency in the North American L-Band satellite market, Good said.

Such a deal also would represent a consolidation for Harbinger, which currently owns 28.80% of Inmarsat and 48.43% of SkyTerra. If the proposed deal between Inmarsat and SkyTerra is completed, Harbinger would own more than 85% of the combined company.

By outlining the financial terms with Harbinger—a significant investor in both SkyTerra and Inmarsat—SkyTerra hopes to secure myriad regulatory approvals in advance of making a formal proposal, Good said.

“To be clear, Inmarsat is not a party to this agreement, nor are we launching a firm offer for Inmarsat,” Good said.

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