While consolidation has virtually decimated the ranks of black-owned investment banking firms, there’s a new competitor in the loop, Chicago-based Loop Capital Markets, L.L.C. And despite seeing many majority companies pull out of the market, this niche player has decided to jump into a narrow municipal bond field with plans to shift toward stocks as it grows.
Loop scored instantly upon its September start-up with the Illinois Sports Facilities Authority appointing the firm sole financial advisor for refinancing its $117 million of series 1989 Comiskey Park Construction Bonds. Days later, Loop l was named a co-manager for the Chicago Park District’s $45 million November bond issue.
Windy City natives James Reynolds Jr., 43, and Albert R. Grace, Jr., 46, are the firm’s co-founders. Reynolds, a former director in Merrill Lynch & Co.’s Chicago regional office, is Loop’s president and CEO. Grace, formerly a Northern Trust Co. vice president, is CFO and managing director of equity sales and research.
SEC-registered, Loop has two divisions: Reynolds leads financial advising and municipal securities origination, structuring and trading; Grace is in charge of equity research focusing on mid-cap stocks of Midwestern companies between $500 million and $4 billion. The firm expects to generate 75% of its first-year revenues from municipal bond activities. The remaining 25% is expected from equities security transactions.
Loop is also courting bond issuers like the Detroit and Chicago public schools for bond issues. Early on, both Reynolds and Grace hoped to continue doing business with firms they established relationships with, including many of the major institutional portfolios in the Midwest. Loop already has a client base of insurance companies, banks, mutual funds, public and private pension funds.
Reynolds himself has spent the last nine years at Merrill Lynch, where he formed ties with major institutional accounts in the Midwest including Allstate Insurance Co., Kemper Financial Services and Van Kampen/American Capital. His partner, Grace, was once president and COO of Selected Financial Services Inc., a Kemper Corp. subsidiary. “I saw some of the objections and concerns they had with any firm. I think the structure of this company addresses those concerns,” says Grace.
Grace and Reynolds, who met as students at the University of Wisconsin at La Crosse, put up $500,000 in personal money to create Loop. Jointly, their families own 100% of the company. In the first year, the co-founders will earn only commissions, not salary.
In March, Reynolds told Merrill Lynch of his desire to start a firm, but he didn’t formally leave until August. While there, he helped Loop formulate strategy during five months of completing NASD paperwork. First Chicago NBD Corp. and Banco Popular are securing the firm with over $5 million of revolving uncommitted subordinate debt.
PHOTO (COLOR): James Reynolds and Albert Grace are jumping into turbulent waters