For Dan Tredwell, Pivotal Question No. 1 is what amount of value can he salvage from Heartland Industrial Partners' debris field of a portfolio?

Pivotal Question No. 2 is this: Can he live down his ties with David Stockman, his erstwhile partner at Heartland and the ill-starred private equity firm's creator and dominant spirit?

Tredwell hopes that an answer of "surprisingly large" to PQ1 will serve as the basis for a yes to PQ2.

For some years, Tredwell, Heartland's only holdover partner, has labored to yank a nickel here and a dollar there from the mess. The damage that Stockman, the former Reagan budget director, left behind in 2005 when he quit his Greenwich, Conn., firm was considerable.

The most infamous debacle was Collins & Aikman Corp., an auto parts maker whose 2001 acquisition Stockman personally shepherded. C&A's bankruptcy obliterated $360 million of Heartland's $1.2 billion 2000 fund and led to Stockman's indictment on charges of defrauding investors and banks. (The charges were later dropped, though Stockman settled a civil suit for $7.2 million.)

Three other holdings, all cyclical manufacturers, including car parts maker Metaldyne Corp., in which Heartland had sunk $326 million, were hurt by recession. By the end of 2008, Heartland's stakes in the three were valued at $91 million.

Tredwell soldiered on. "My view was, and is, that my first obligation was to our LPs." I was one of the guys who went out and raised the fund, and when the problems hit, I wasn't going to leave them in the lurch," he says. "I was going to do what I could to get it fixed. That will continue to be my priority until it's done."

With a boost from an improving economy, he has transformed the rubble into something of worth.

Tredwell says he eked out about $15 million selling Metaldyne in 2006 to Asahi Tec Corp. and an additional $100 million spinning out Metaldyne's stake in another Heartland asset, TriMas Corp., to the fund's limited partners. The fund's stake in textile maker Springs Industries Inc. shot up after Tredwell engineered a spinout of its profitable window-blinds unit.

"We invested $239 million, and today total distributions and remaining value is about $270 million," he says.

At TriMas, a manufacturer whose operations Tredwell worked with management to overhaul, Ebitda, which had dipped as low as $15 million, ought to top $50 million this year, he says. "We put $275 million to $280 million in TriMas," and the investment "is at about $280 million. ... But we have confidence TriMas is going to continue to rise in value."

"We've sent back over $200 million to our investors in the last six months," Tredwell adds. All told, he projects LPs will recoup about $600 million, or 50 cents on the dollar.

Though his main focus has been Heartland, Tredwell, 51, a former leveraged finance banker at J.P. Morgan Chase & Co., in 2009 launched a restructuring and M&A advisory firm, CoveView Advisors LLC, with former J.P. Morgan colleagues Doug Traver and Tom Canning. Down the road, he says, he'd like to raise a small buyout fund and jump back in the game.

That could be a tall order. To do so, he will have to separate himself in investors' minds from Stockman's legacy, persuade them that he won't repeat Heartland's mistakes (the worst one, he says, being a lack of diversification: "I'd never do that again, for sure!") and convince them that he has the chops to build values, as he believes his recent handiwork shows.

The signals The Deal magazine got from LPs weren't encouraging. Of the six contacted, five either declined comment or didn't return calls.

The one who spoke did so on the condition of anonymity. He remarked: "He's made the best he could out of a very, very difficult situation. He's been steadfast throughout. But I'm not sure he can go back to the same investors and raise money. We wouldn't invest. The numbers are the numbers."

Told what the LP said, Tredwell responded in part: "It doesn't surprise me that some of our LPs, particularly those who were initially close to David Stockman, appreciate our recent work but might not sign up again. The fund was in the emergency room for a long time. But I'm confident that our LPs have a lot of respect for what I've done since I took over. I'm confident that when we bring an investment strategy and show them a team that is suited to execute that strategy, people will listen."

Meanwhile, Stockman has pursued a different rehabilitation strategy, recasting himself as a pundit and TV talking head. To judge by his many appearances on CNBC and in The New York Times' op-ed pages, he's achieved a level of success that eluded him in private equity.

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