Carl Icahn restructures personal loan after short seller attack

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Carl Icahn has restructured a multibillion-dollar personal loan he took against shares in his investment firm Icahn Enterprises, after a short-seller report about his debts caused the stock price to slump.

Icahn Enterprises said on Monday that the octogenarian billionaire had agreed with five large banks to convert the margin debt into a three-year term loan. The new terms require him to pledge virtually all of his Icahn Enterprises stock as collateral — 95 per cent, up from 60 per cent of his stake now — and make a $500mn principal payment before September 1.

The amendment underscores the deep financial pressure Icahn has faced since Hindenburg Research published a report on his borrowing in May. The short-seller report said Icahn was vulnerable to margin calls forcing him to pledge more shares or sell stock if Icahn Enterprises’ share price fell. The stock was down more than 50 per cent following the report.

Icahn owns about 85 per cent of Icahn Enterprises, a conglomerate spanning refining and car parts businesses, which also holds a portfolio of hedge fund-style investments that he manages.

The reworked loan will take out provisions tied to the company’s share price, replacing them with a commitment to pledge more collateral only if Icahn Enterprises’ net asset value falls below a pre-determined loan-to-value ratio.

Its shares rose more than 13 per cent in early trading on Monday after news of the restructuring.

Despite relief from the risk of a continued decline in the share price, the amendment contains other onerous terms.

The lenders, comprised of Bank of America, Bank of Montreal, Deutsche Bank, Morgan Stanley and M&T Bank, have also asked Icahn to make $87.5mn in quarterly principal payments beginning in September 2024 and to repay $2.5bn in final principal at the end of the loan, in 2026.

In addition to pledging 320mn Icahn Enterprises shares, or more than 95 per cent of his total shares outstanding, as collateral, Icahn will also secure the borrowing with $2bn of investments he holds outside of the conglomerate.

Hindenburg’s report captivated the investment industry as a rare example of one famed activist going after another. Hindenburg alleged that Icahn Enterprises was overvalued and holding assets at an inflated value on its balance sheet, prompting Icahn to hit back and call the report “self-serving”.

He did admit to mistakes that had hurt his investment record in recent years, telling the Financial Times he should not have maintained his ill-fated short bets during one of the longest bull market runs in history, which had cost his group almost $9bn over six years.