At Seder tables next week, many Passover celebrants will nosh on matzo and gefilte fish made by the Manischewitz Company.
But for one hedge fund manager, Philip A. Falcone, Manischewitz may leave a bitter taste.
Mr. Falcone â€" chief executive of the hedge fund Harbinger Capital Partners, which until recently owned a controlling interest in Manischewitz â€" suffered a loss when Harbinger sold its position to Sankaty Advisors, an arm of the private equity giant Bain Capital, this week, people close to the matter said.
Manischewitz announced on Tuesday that Sankaty was its new owner, though the company did not disclose the financial terms or other circumstances of the deal.
Sankaty, an investor that specializes in credit, including distressed debt and high-yield bonds, plans to help the maker of macaroons and chicken broth expand beyond the kosher aisle, with the aim of increasing its sales year-round and reducing its reliance on the Passover holiday.
But the process by which Sankaty gained full ownership underscores the challenges that Manischewitz, which racked up losses under Harbinger’s control, continues to face.
The history of Manischewitz under Harbinger and Mr. Falcone was a troubled one from the start. His hedge fund acquired a controlling interest in the company in 2007 from the R.A.B. Food Group, some two years after Harbinger began buying up its debt.
Harbinger paid roughly $60 million for Manischewitz’s debt, according to people briefed on the matter who were not authorized to discuss it publicly. Last year, Harbinger sold the debt to Sankaty for about $55 million in a deal negotiated by Jefferies bankers.
But Harbinger’s losses are probably greater than those numbers suggest. In all, Harbinger sank more than $100 million into Manischewitz during the years it owned the company, and it went though a series of chief executives who were unable to revive its fortunes. The company lost money for much of that time, and in 2008, Mr. Falcone put the investment in a so-called side pocket for hard-to-sell assets that had performed poorly.
The change in ownership from Harbinger to Sankaty can hardly be called a sale, at least not in the conventional sense of the word.
Given the troubled financial condition of Manischewitz, Sankaty was able to convert its debt to equity, according to one person briefed on the matter. Its stake is now 100 percent after the transaction announced this week, according to the company’s new chief executive, Mark Weinsten.
There had been an uneasy relationship between Sankaty and Harbinger after Sankaty came on board, another person briefed on the situation said. Eventually, Sankaty forced Harbinger to walk away from the company.
In announcing the transaction on Tuesday, Manischewitz said it had “secured a strategic investment from Sankaty Advisors.â€
Harbinger, for its part, had previously written down the losses on Manischewitz, so it probably wasn’t too difficult for Mr. Falcone to cede control. At one point last year, Harbinger had tried to sell Manischewitz in a process run by the investment bank Houlihan Lokey, one of the people briefed on the matter said, but no sale materialized.
Spokesmen for Harbinger and Sankaty declined to comment.
These days, Mr. Falcone, who was barred from the securities industry for at least five years after settling a securities fraud lawsuit with regulators last summer, is trying to position himself for a comeback, which involves running a publicly traded holding company called the Harbinger Group.
The chief rabbi of Manischewitz, Yaakov Y. Horowitz, said in an interview earlier this week that he had a “very positive feeling†about the company’s new owners. Asked whether he had any role in the deal, he answered no.
“I am profoundly thankful not,†he said.
