A Rising Tide

Explosive growth in the securities business gives African American investment banks a boost

issue from AT&T. Blaylock and Williams Capital were also the only minority-owned firms selected to co-manage the blockbuster $1.8 billion initial bond deal from Goldman Sachs & Co. last year.

While African American investment bankers say they are gradually getting a place at the table because of their skills and abilities, some observers attribute growing minority participation in prestigious deals to the Rev. Jesse Jackson’s Wall Street Project. For the past few years, Jackson has pushed corporate America to include minority-owned broker-dealers in high-profile stock and bond offerings.

Corporate finance deals generate much more lucrative fees than do other types of business. Underwriters are charging companies issuing secondary offerings fees of 3% to 5%. for investment-grade bonds, companies pay an average of 1.5% to 2%.

Firms like Utendahl Capital, Blaylock & Partners and Williams Capital-which have made diversification their cornerstone-can count on asset management fees to bolster profits during times when underwriting volume is slow or trading and sales business is down. These firms will continue their diversification efforts, aided by the dismantling of the Glass-Steagall Act (see “Total Return,” this issue).

While Utendahl Capital has been a trailblazer among minority-owned firms in the corporate bond and money management arenas, Siebert Brandford Shank is cl
early setting the pace in the municipal bond world. In 1999, SBS senior-managed $2.5 billion in municipal offerings, making the firm a heavy-hitter among black- and majority-owned financial institutions.

Among the highlights of the firm’s lead-managed deals last year was a $25 million offering for Lubbock, Texas. The $67.5 million new money and refunding issue provided tax relief and significantly reduced borrowing costs for the Chicago Park District, and a $193 million bond deal for the City of Houston.

Already this year, SBS has been appointed financial advisor for the Chicago Housing Authority’s $1.5 billion public housing plan. The city plans to raise $600 million through a series of two- or three-bond deals to tear down then rebuild dilapidated buildings.

“As financial advisor, we’ll be helping the Authority to select underwriters, deal with rating agencies, and negotiate with HUD. Essentially, we’ll help them assemble their finance team to begin the transformation of public housing in Chicago,” says Adrienne Archia, managing director and head of the SBS Chicago office.

Plum advisory assignments complement the firm’s underwriting strength. In the first quarter of 2000, SBS lead-managed two transactions valued at $357 million.

The firm’s creative ideas, use of technology, and concentration on a few select areas-such as redevelopment and transportation-are reasons for SBS’s success. To prosper in the new millennium, SBS has also adopted a regional approach to covering the country. In 1999, the firm reestablished its Los Angeles branch, opened offices in Washington, D.C., and Miami and doubled the size of its Chicago office.

Rapid growth is also taking place at other African American-owned brokerages. Last May at Jackson Securities, founder Maynard Jackson turned over the CEO and president reins to Reuben R. McDaniel III, an ex-Bear Stearns executive who most recently served as managing director of capital markets with Llama

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