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Providence props up security firm after Snowden debacle

The fallout from the Edward Snowden spy affair is proving even more costly for Jonathan Nelson’s Providence Equity Partners.

The private-equity firm is preparing to invest up to an additional $15 million in Altegrity, the parent of United States Investigations Services, which allegedly botched the background check on leaker Snowden, The Post has learned.

Meanwhile, Providence has abandoned efforts to sell Altegrity’s more profitable division, HireRight, a provider of private employer background checks, amid the controversy, according to sources.

Without the cash injection, Altegrity — struggling with $1.8 billion of debt and government budget cuts — will likely violate its loan covenants by the end of the month.

The moves would allow Providence more time to try to restructure Altegrity’s burdensome debt and keep control of the business, according to sources.

Providence, which declined to comment, has already sunk $782 million into Altegrity, one of its biggest investments.

Altegrity will likely fall below a required operating profit-to-debt ratio on March 31. It has more than $1 billion coming due early next year, with no reasonable chance at paying its principal.

Still, there are creditors in the senior loan who have confidence in the business, a source said.

Altegrity will likely offer a new senior loan with a higher interest rate — one that requires it to meet certain requirements — in exchange for a later maturity date, a source said.

In January, the Department of Justice sued Altegrity’s USIS, accusing it of bilking the government of millions by providing hundreds of thousands of bad background checks. The government said the Snowden vetting wasn’t part of the suit.

Still, the spying controversy, coupled with the threat of fines and other legal action, has exacerbated Altegrity’s debt woes.

“You just served up the whole government database to the world,” a source said. “Nelson has to manage it.”

The DOJ is expected to make a decision on whether it will seek to fine the company before the end of the year. Investors fear that any penalty north of $50 million will sink the business, sources said.

Providence may be betting that the DOJ will work out a deal to keep USIS, the largest outside government background investigator, in operation, debt investors said. The agency did not return calls for comment.

Providence bought USIS in a $1.5 billion leveraged buyout in 2007, eventually rolling it up into parent company Altegrity.