Things Not Going Well for Rattner

It’s been a rough few days for Steven Rattner. He stepped down from his role as head of Obama’s auto task force (one step ahead of a looming scandal, supposedly) and now Quadrangle, the private-equity fund he co-founded, has lost control of the portfolio company that published Maxim magazine.

The worst part for him? He lost the company to a long-time rival.

Remember when we wrote this?

You’ll recall that the three men in charge of the government team on the auto industry bailout are Steve Rattner, Ron Bloom (an advisor to the UAW), and Matt Feldman (a former Willkie bankruptcy partner).

Rattner already has a strained relationship with the industry.  He was a co-founder of private-equity fund Quadrangle Group, which hasn’t played nicely with Cerberus.  The Deal summarized the conflict a few months ago when Rattner emerged as a frontrunner for the job:

Cerberus Capital Management LP, the current owner of Chrysler LLC, lent Rattner’s Quadrangle $125 million as part of the financing for the buyout of Maxim magazine and music publication Blender. As both titles limp through the drop in advertising revenue, Cerberus wants more capital invested to cover the debt levels, a request that Quadrangle has balked at. The two remain at loggerheads over the issue with Cerberus claiming the loans are technically in default.

As one source told the New York Post, “Cerberus is about to foreclose on the loan to Quadrangle, and now Steve Rattner is going to be the boss of Cerberus.”

The cramdown of Cerberus and other bondholders certainly didn’t win Rattner many friends.

Cerberus got a small measure of payback on this publishing deal. Quadrangle had already written down its $250 million investment down in Alpha Media to zero, and now the company is going to do a debt-for-equity swap that will leave Cerberus in control and Quadrangle officially wiped out.

According to the NY Post, Rattner’s former colleagues “aren’t too happy” with him. Things aren’t all peachy over at Cerberus, though – the firm is dealing with investors who are trying to get their cash out of one of its poorly performing funds.

Davis Polk’s William Aaronson (Johns Hopkins BA ’92, Harvard JD ’95) represented Quadrangle on the original LBO. Cerberus has used quite a few firms, including Schulte and Lowenstein Sandler (on United Rentals, which ended up a disaster). Not sure yet who got the work on this deal.

Meanwhile, somewhere in Miami, Tom Lauria is reinstating his subscription to Maxim.

Tagged as: cerberus, chrysler, davis polk, schulte