Jefferies Loan to Harbinger Will Default If Falcone Is Charged

Jefferies Group Inc. has been trying to spread the risk of a $190 million loan to Phil Falcone’s Harbinger Capital Partners LLC by offering a syndication deal with an unusual caveat: it defaults if Falcone is indicted.

Jefferies has been marketing all or part of the loan to other investors, said a person with knowledge of the situation. Loan documents detail the securities firm’s pitch to investors, saying it’s collateralized by $2.4 billion in assets in Harbinger’s main fund. The terms include a “key man” provision mandating the loan’s default if Falcone reduces his role, his ownership stake, or is indicted for any criminal offense.