Quadrangle Shapes Up Nicely

Managers of the Quadrangle Group’s distressed debt fund are making market headway, despite being embroiled in litigation by their former employer.

In an email sent to investors on June 5 and obtained by Private Equity Week sister publication Buyouts, the Quadrangle Debt Recovery Fund (QDRF) so far has raised over $100 million since being launched at the beginning of April. The vehicle is being marketed with a target capitalization of $500 million, and holds capital calls at the beginning of each month. QDRF received approximately $10 million of internal commitments (including $5 million from its investment team) in April, another $40 million in May and an additional $50 million in June.

According to the email, QDRF earned 0.70% net of fees for the month ending May 31. Since inception through May 31, the fund has earned 1.21% net of fees. No information about specific allocations was available at press time, although the fund is expected to pump between 30% and 40% into telecom and media deals. The rest will be disbursed across a variety of other industries.

While the distressed debt vehicle is having little trouble enticing investors, its success is rubbing at least one group the wrong way.

QDRF is co-managed by Michael Weinstock and Andrew Herenstein, both of whom joined Quadrangle in February after less than a year spent running the distressed debt program for Lazard LLC. The following month, Lazard began winding down its Debt Recovery Funds and claimed in a Delaware court filing that the pair had breached fiduciary responsibilities to both the funds and the firm.

“We believe that this lawsuit is without merit and, thus, recently filed a motion to have the case dismissed,” said the email to QDRF investors signed by Weinstock and Herenstein. “This litigation has no impact on investors in QDRF and has not been a material distraction to us in our daily investing activities.”

Lazard did not return calls requesting comment on the suit.

Quadrangle Group was formed in 2000 as a telecom-focused investment firm by former Lazard investors Steve Rattner, David Tanner, Peter Ezersky and Joshua Steiner. Its first venture was a private equity vehicle that closed on $1.08 billion last summer.

Contact Dan Primack