UPDATE 2-Quadrangle deal revives plans for new fund-source

* Obstacle for raising new fund removed -source

* Quadrangle’s existing fund largely invested

* Settlements to be paid by Quadrangle GPs- source

* Rattner disagrees with characterization of events
(Adds statement from Rattner’s counsel)

By Megan Davies

NEW YORK, April 15 (BestGrowthStock) – Private equity firm
Quadrangle Group is to spend the coming months laying the
groundwork for raising a new fund, now that a long-running
pay-to-play probe has been settled, a source familiar with the
situation said on Thursday.

Quadrangle earlier on Thursday settled the probe that had
been hanging over it and which still dogs its departed
co-founder Steve Rattner. [ID:nN15228127]

Rattner’s departure and the investigation had been the
obstacle to Quadrangle raising fresh money from investors.

The firm has largely invested its $2 billion second fund,
which it finished raising in 2005, and had put plans for a
fresh fund on hold during the turmoil.

Quadrangle is to spend the coming months laying the
groundwork and then meeting with investors, with the aim of at
some point starting to raise a third fund, the source said.

Raising fresh capital is still very difficult for private
equity funds, and whether it is successful in winning
investors’ confidence and dollars remains to be seen.

Rattner had been one of the key people at Quadrangle, a
media-focused firm which has investments in companies such as
movie studio Metro-Goldwyn-Mayer. [MGMYR.UL]

He quit Quadrangle in 2009 to run U.S. President Barack
Obama’s auto bailout task force, a post he left a few months
later to return to private life.

Quadrangle distanced itself from its past on Thursday,
saying saying in a joint statement issued with the New York
Attorney General on its website “we wholly disavow” Rattner’s
conduct, which it described as “inappropriate, wrong, and

Jamie Gorelick, counsel for Rattner, said in a statement
that Rattner did not agree with the characterization of events
released on Thursday, including those contained in Quadrangle’s

“Mr. Rattner shares with the New York Attorney General the
goal of eliminating public pension fund practices that are not
in the public interest,” Gorelick said. “He looks forward to
the full resolution of this matter.”

Investors had the right after Rattner quit to halt new
investments by its existing fund. New York City and state
pension funds indeed voted to block new investments, but
despite that, Quadrangle won the overall vote of confidence
from investors, a source said at the time.

A former New York Times reporter, Rattner worked with No. 1
U.S. cable television operator Comcast Corp (CMCSA.O: ) as an
adviser on its failed bid for Walt Disney Co (DIS.N: ) and as an
investor in its purchase of MGM. He also was on Cablevision
Systems Corp’s (CVC.N: ) board.

Rattner also has advised New York Times Co (NYT.N: ) Chairman
Arthur Sulzberger Jr on the newspaper group’s troubles in
recent years, and struck a deep friendship with the publisher
when they reported from the Times’ Washington D.C. bureau three
decades ago.

Rattner retains an economic interest in Quadrangle,
according to the source who spoke to Reuters.

Quadrangle’s settlement will see it pay New York State $7
million and pay $5 million to settle the SEC’s charges.

That capital will come from the fund’s “general partners,”
meaning the executives that run and invest the money, not the
“limited partners” — the pension and endowment funds that
invest in it — the source said.


(Reporting by Megan Davies, editing by Maureen Bavdek and
Matthew Lewis)

UPDATE 2-Quadrangle deal revives plans for new fund-source