$300 million in debt for the Tennessee Valley Authority. In 1997, the firm came back and lead-managed a $150 million bond offering for Texaco Inc. in the wake of the oil company’s settlement of a multimillion-dollar racial discrimination lawsuit.
In 1998, the Bear Stearns alliance has already helped Blaylock get the nod to underwrite and sell to institutional investors $800 million in corporate bonds issued by Wait Disney, Ford Motor Co. and a division of General Motors. Other minority-and women-owned firms, such as Williams Capital and Muriel Siebert & Co., also took part in these deals as part of an underwriting syndicate put together by Bear Stearns, which also profits. It earns underwriting fees from the arrangement and uses its affiliation with a minority-owned firm as a selling point with debt issuers.
Since margins are slimmer on municipal business, expect African American firms with a strong capital base and distribution to turn to corporate underwriting.
“The corporate market certainly represents a new frontier,” says Bernard Beal, head of M.R. Beal & Co. (No. 7 on the BE INVESTMENT BANKS list) He should know. A veteran of the investment business, Beal has twice tried to penetrate the corporate arena. Though his initial efforts were unsuccessful, he vows to take another run at the business. And for Beal, persistence has typically paid off. His firm also ranked among the top contenders during the era that saw the rise of Grigsby Brandford, Pryor McClendon, and WR Lazard. Today, however, Beal’s operation is the only one of those four firms that remains largely intact. “Who would’ve thought that I would be the last man standing?” asks Beal.
Meanwhile, black-owned regional firms are carving out niches in specialty areas such as picking small-cap stocks, but most still concentrate on public finance. In Alabama, Harold Gilchrist, CEO of Gilchrist & Co. Inc. (No. 11 on the BE INVESTMENT BANKS list), says although he ventures into commercial development projects, underwriting muni bonds remains his bread-and-butter business. Gilchrist recently led the $60 million underwriting of a major theme park called VisionLand, located outside of Birmingham.
The bonds sold to finance the park were not rated; in an unprecedented show of cooperation, 11 municipalities in Alabama agreed TO guarantee the bonds. “We’ve had to be a little creative to exist in this market,” Gilchrist says. The 300-acre amusement park is to open May 23; the park’s Web site has already received 7,000 hits from Internet surfers around the world. And Alabama officials credit Gilchrist with helping to put the state on the map.
“VisionLand is going to change Alabama to a destination point. All of this can be directly traced to Harold’s firm,” says Larry Langford, mayor of Fairfield. The VisionLand deal also led to a $20 million entertainment zone project for Gilchrist.
Such projects give Nathan Chapman hope for the future. His company focuses its research efforts on “the domestic emerging market,” or businesses owned by African Americans, Latinos, Asians and women. Chapman