Quadrangle Group Plots Post-Rattner Future, New York Times's Dealbook Says

Quadrangle Group LLC, the private- equity firm co-founded by Steven Rattner, announced new leadership and said it won’t pursue an outside investment or partnership.

Michael Huber, as president and managing principal, will lead the firm along with co-founder Peter Ezersky, New York- based Quadrangle said in a letter to investors today. Co- President Josh Steiner will reduce his involvement and become a senior adviser, while managing principals Andrew Frey and Ed Sippel will leave in 2011, according to the letter.

The firm, whose founder Rattner was the subject of state and federal investigations of corruption at New York’s state pension fund, said it decided not to raise a third fund or sell a stake in the business. The latest fund, named Quadrangle Capital Partners II, has five years remaining after its investment period ends this year.

“We did not believe any of the alternatives presented the opportunity to create greater value for, and alignment with, our limited partners than the strategy we are pursuing at this time,” the firm said. “As we enter 2011, the firm may continue to explore various strategic opportunities, including with various potential minority investors who have already expressed interest in the firm.”

‘Significant Capital’

Quadrangle’s managing principals will invest “significant capital” into the firm, the letter said. The commitment reserve for QCP II, used to fund additional investments in companies in the portfolio, will be $366 million at Dec. 31, and Quadrangle will reduce that to $300 million, according to the letter.

“We’ve been keeping our heads down and focusing on what matters most to our investors, which is performance,” Steiner said in an interview today.

The firm’s Quadrangle Capital Partners I fund was up 39 percent and QCP II increased 18 percent in the first nine months of this year, according to the letter. The two funds have returned $632 million, or 35 percent of invested capital, to investors since Dec. 31, 2008.

“In terms of our next fund, there is no timetable,” Huber said in an interview. “When the time is right, we’ll make our next move.”

Quadrangle also hired Steven Felsher as a senior adviser and Thomas Kohut as a principal. Felsher, who will serve on the firm’s investment committee, joined from marketing services company Grey Global Worldwide Group Inc. Kohut, who worked at Ernst & Young, will focus on portfolio management, the letter said.

Two-Year Ban

Rattner, who left Quadrangle in February 2009, agreed on Nov. 18 to pay $6.2 million and accept a two-year ban from associating with broker-dealers or investment advisers to resolve a Securities and Exchange Commission probe of kickbacks in connection with the New York state pension fund.

Rattner, 58, accused Quadrangle of trying to shift responsibility to him after settling investigations. Quadrangle settled with Cuomo and the SEC in April. Rattner filed a petition last month in New York State Supreme Court to obtain documents and testimony for an undisclosed arbitration proceeding he brought Sept. 2 against Quadrangle.

Quadrangle said in the letter that it tried to reach a settlement with Rattner before his arbitration claim.

“We believe his claims are groundless and will defend ourselves vigorously,” Quadrangle said in the letter.

Cuomo sued Rattner separately on Nov. 18, seeking at least $26 million and an immediate lifetime ban from the securities industry in New York.

To contact the reporters on this story: Cristina Alesci in New York at calesci2@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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