Stephen Feinberg’s troubled military-facilities contractor, IAP Worldwide Services, tripped a debt covenant on Jan. 1 and could soon be taken over by creditors — but a move by the Pentagon months ago will ensure US troops will not be affected, The Post has learned.
The Pentagon, as IAP started showing signs of financial strain, required Feinberg’s Cerberus Capital Management to provide a $50 million line of credit to the company, which provides logistical support in addition to running base-camp facilities for the Defense Dept.
The credit revolver, which so far has not been used, will nonetheless insure IAP can complete its mission, sources said.
Feinberg provided the credit facility so he could meet his military obligation and not worry about liability ever coming back directly to his private-equity powerhouse, a source said.
“DOD knew this company was in severe financial distress and required Cerberus to guarantee service on its contracts,” a source said.
IAP, based in Cape Canaveral, Fla., manages airfield and airspace operations, provides medical supplies and shelter, and runs dining-hall operations throughout the Middle East and Asia, has been hurt in recent years by tighter defense budgets.
Locally, IAP installed and operated generators after Hurricane Sandy, helping restore the New York City subway, Wall Street buildings and the World Trade Center site.
The line of credit is becoming a key backstop as IAP creditors, including Monarch Alternative Capital, are unwilling to pony up more cash.
Presently IAP, a 60-year- old company with more than 7,000 employees, according to its website, is in talks with its creditors — including Monarch — about giving them control of the company in exchange for forgiving much of its debt.
On a positive note, the Bipartisan Budget Act will restore $63 billion to Defense’s budget over two years — something that has executives at defense contractors like Lockheed Martin, maker of the F-35 fighter jet, and, presumably, IAP — smiling.
The added funds will help offset cuts implemented by sequestration.
For the 53-year-old billionaire Feinberg, who has been fighting for years to right the ailing IAP, which he purchased in 2004, the added funds are certainly welcome news.
Even though Cerberus is likely losing control of IAP to creditors, it will to do very well with the investment. Feinberg has made back multiples of his 2004 IAP investment through dividends, a source close to the situation said.
The situation with IAP is in sharp contrast to Cerberus’ position when it owned failing Chrysler and, separately, GMAC, and succeeded in getting government bailouts for its companies.
However, in a similar fashion, Feinberg did not lose money on Chrysler either.
Cerberus declined comment.