Rattner departure triggers key-man issues for Quadrangle

The New York-based media- and technology-focused firm has asked LPs to remain committed to its second fund, noting it is prepared to capitalise on opportunities in the current environment.

The departure of Steve Rattner from Quadrangle Capital Partners has triggered a “key-man” clause under which limited partners in the firm’s $1.8 billion second fund can terminate the fund’s commitment period, which has less than two years left.
 
The second fund is already 75 percent committed.
 
Rattner’s departure also triggered the key man clause in the firm’s $1.08 billion first fund, which closed in 2001, but that fund’s commitment period is over, according to a letter from Quadrangle to its limited partners.
 
“You have entrusted us to invest your capital and manage portfolio investments on your behalf and we believe that completing [Quadrangle Capital Partners] II’s commitment period in is in the best interest of our limited partners,” the firm said in the letter.
 
Rattner said Monday he is leaving the firm to join the administration of US President Barack Obama as an advisor to the Treasury Secretary Timothy Geithner and National Economic Council director Lawrence Summers on the auto industry.
 
In a separate letter to LPs, Rattner encouraged investors to stick with the fund through the commitment period.
 
“I am pleased to state unequivocally that my family will enthusiastically fulfill its capital commitment to QCP II and looks forward to participating in the continuing investments and portfolio value creation of the firm,” Rattner said in the letter.
 
Executives from two LPs in the second fund, the New Mexico State Investment Council and the New Jersey State Investment Council, said they were taking the matter under advisement. and have yet to make any decisions. 
 
Quadrangle, which focuses on media investments, is poised to “make compelling investments” during the remainder of the commitment period, the firm said, including using additional capital to grow its portfolio companies.
 
“Several of our portfolio companies are well positioned to capitalise on growth and acquisition opportunities in this environment,” the firm said.
 
The firm, which has $6 billion under management, also believes that “completing the commitment period allows us to attract and retain the best investment talent during these extraordinary times”, the firm said. 

According to a Dow Jones report that cited unnamed sources, the firm is raising its third fund, with a $2.25 billion target.
 
Prior to Quadrangle, Rattner was deputy chairman and deputy chief executive officer at Lazard Freres, where he founded the firm’s media and communications group. In 2000, he co-founded Quadrangle with other former Lazard investment bankers Joshua Steiner, Peter Ezersky and David Tanner. Tanner left the firm in 2007 to lead Arlon Group, an alternative investment arm within agribusiness firm Continental Grain.

Quadrangle could not be reached for comment at press time.