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UBS Joins Forces With JPMorgan Muni Group

In a new and seemingly unique arrangement among two Wall Street giants, UBS Wealth ManagementUS and JPMorgan's municipal finance group are joining forces in an exclusive, multi-year agreement that will allow UBS - which in June stopped negotiated underwriting of municipal debt - to have access to JPMorgan's negotiated new-issue product for its wealth management clients.

In turn, JPMorgan will gain access to UBS' more than 8,200 financial advisers, broadening its distribution capabilities nationally. The agreement, which The Bond Buyer learned of yesterday, is effective immediately, but will be officially launched when the firms participate in their first offering together by the end of the month or in September, according to Jim Hausmann, head of transaction products at UBS Wealth Management.

He said both firms will reap benefits from the arrangement - UBS in accessing much-needed municipal product for its high net-worth and other individual retail clients around the country, and JPMorgan in providing its issuer clients with broader distribution of bonds. Financial terms of the agreement were not disclosed.

The firm began working on the agreement immediately following its June 6 announcement that it was exiting the institutional municipal business and moving roughly 70 of its investment banking municipal staff into its wealth management division, Hausmann said.

UBS was in negotiations with several other major players in the municipal finance industry, but decided to partner with JPMorgan because its market share and business platform offered the best fit for UBS' clients, according to Hausmann.

"A lot of people assumed we were exiting the market, but for us, it's a clear statement to the market that UBS is absolutely a buyer of municipal product, is absolutely in the market place, and we're psyched to be joining with JPMorgan," he said.

"This isn't a fly-by-night, 30-day agreement that we are going to try out. There is a real commitment from both sides, and we think it's a mutually beneficial relationship that should go on on a multi-year basis," Hausmann explained. He said the firms have not pinpointed an exact timeframe for the length of the plan.

"There might be some speed bumps that might come along, but nothing major to overcome," he added.

Hausmann said the plan with JPMorgan is a means of leveraging the strengths of its former investment bank in a unique agreement with a firm that has a prominent stature in the market place and could deliver quality product for its clients.

JPMorgan spokesman Brian Marchiony said his firm is equally optimistic about the joint venture.

"We are excited about the agreement which allows JPMorgan and our issuer clients the ability to reach a broader set of investors through UBS' vast national footprint," he said.

Under the agreement, individual clients from both firms will have equal access to negotiated new-issue product at the same offering prices. "There will be no advantage to either client ... all of the clients will be treated with equal standing," Hausmann said.

UBS will also have access to all negotiated new deals done by JPMorgan - unless the firm opts out of a particular deal because it is inappropriate for its wealth management clients, Hausmann noted. "It's not an issuer-driven model, it's an investor-driven model," he said.

He said the JPMorgan agreement will provide 80% to 90% of the product it needs for its clients, but said it could look at other opportunities to satisfy the other 10% to 20%.

With 400 sales offices around the country, UBS would not rule out establishing a similar partnership with other firms to fill a void in a region or area not covered by JPMorgan, or where JPMorgan opted not to participate - but that would be a secondary relationship, according to Hausmann.

"We're not precluded from activity with other firms where JPMorgan is not active," he said.

So far this year, JPMorgan - whose underwriting volume totals include deals done by the former Bear, Stearns & Co. before JPMorgan acquired it in March - has senior-managed $22.4 billion, while UBS Securities has senior-managed $14.5 billion, as of Aug. 5. That compares to 2007, when JPMorgan is credited with managing $45.4 billion, and UBS managed $32.6 billion, according to Thomson Reuters data.

The firms' underwriting activity was more closely balanced, for instance, in 2006 and 2005, when JPMorgan managed $38.1 billion and $42.5 billion, respectively, while UBS managed $34.7 billion and $41.4 billion.

Over the last 10 years, UBS only had a higher volume of senior-managed negotiated underwritings than JPMorgan in 2004 and 1999, when the firm did $41.3 billion versus $35.9 billion at JPMorgan, and $18.9 billion versus JPMorgan's $13.9 billion, respectively.

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