After a year in which the landscape of underwriters in the municipal market changed dramatically, Bank of America Corp. and Merrill Lynch & Co. have emerged to combine as the top senior manager for the first quarter of the year.
Boosted by Merrill's role as co-senior manager on March's $6.5 billion offering from California, Bank of America and Merrill Lynch served as the senior managers on 111 issues with a par value of $15.5 billion through March, according to Thomson Reuters, with credit split on joint issues. The volume far outpaces the $10.6 billion and 12.6% market share the firms registered during the first quarter of last year.
Bank of America and Merrill Lynch - which earlier this week laid off more than a dozen municipal professionals as they continue to integrate their staffs - led both the negotiated and competitive rankings. The firms have through three months combined to serve as senior manager on 97 negotiated deals with a par value of $13.2 billion and 14 competitive deals with a par value of $2.3 billion. The firms have so far continued to underwrite business under both names
Despite some of the changes in the market - such as JPMorgan's purchase of Bear, Stearns & Co and UBS Securities' decision to close its public finance unit - the top underwriters in municipals remained largely in place. Citi, for instance, fell behind Bank of America-Merrill Lynch, but kept up last year's pace, underwriting $13 billion on 82 issues in 2009 compared to $13.5 billion on 93 issues in 2008.
Barclays Capital - 32 issues with a par value of $7.8 billion - and JPMorgan - 63 issues with a par value of $7.1 - both generated less business than last year, but remained as the third- and fourth-ranked senior managers, respectively. Barclays last fall acquired the investment banking operations of Lehman Brothers.
Morgan Stanley jumped two spots to round out the top five. It served as the senior manager on 76 issues with a par value of $6.6 billion, compared to 54 issues with a par value of $4.6 billion in the first three months of 2008.
But the parent companies of many of the banks that have historically led the senior manager rankings have recorded billions in losses amid the credit crisis and cut back staffing across the board.
The headcount reductions at Bank of America and Merrill mark only the latest of hundreds of job losses that have occurred in recent months throughout the market's biggest public finance departments.
As these firms pull back, the turmoil has created opportunities for many other market participants. A number of firms have increased the size of their staffs and maintained their commitments to public finance.
RBC Capital Markets, for instance, served as the senior manager on $3 billion in new issues in the first quarter of 2009 compared to $1.8 billion in 2008 - despite underwriting 18 fewer deals. The turmoil throughout the market has given the bank the opportunity to do more business on deals worth $100 million or more, according to Chris Hamel, RBC's head of municipal finance.
RBC last year recruited Bear Stearns' health care group and brought in a substantial of portion of UBS Securities' single-family housing team. It has also been added to senior manager pools, such as the Dormitory Authority of the State of New York and for Las Vegas' McCarran International Airport.
"We believe that's reflective of an environment in which clients are, given the turmoil, very receptive of the RBC Capital Markets story," Hamel said of his firm's increased business. "We've got a very good group of bankers, a very stable parent in the form of RBC and I think, most importantly, a strongly evident commitment to the municipal industry."
In the small-issue category, Robert W. Baird & Co. jumped to first from fifth, serving as the senior manager of 80 issues with a par value of $378.8 million in 2009, compared to 54 issues with a par value of $176.7 million in 2008.
The firm has in recent months added bankers and offices in Tennessee, Pennsylvania and Colorado, expanding outside its traditional Midwest footprint. It now has 27 public finance bankers working in nine offices, and has also increased its distribution capabilities.
"With that combination of adding talent and expanding our reach in both the banking and sales side, it's allowed us to really aggressively support our clients on both the negotiated and competitive side," said Baird head of public finance Keith Kolb.
Morgan Keegan & Co. led the bank-qualified bond rankings, serving as the senior manager on 73 issues with a par value of $557.3 million. RBC placed second with 55 issues with a par value of $453.9 million, and Robert W. Baird placed third with 80 issues with a par value of $448 million.
On the financial adviser side, Public Resources Advisory Group jumped into the top spot thanks in part to its role in California's $6.5 billion offering. The firm served as the FA on 31 issues with a par value of $12.9 billion in 2009, compared to 27 issues with a par value of $5.1 billion in 2008.
"The fourth quarter of 2008 was very difficult for our clients to access to market, due to reduced demand, relatively high interest rates, and the whole financial crisis," PRAG president Steven Peyser said. "The first quarter of 2009, the markets have opened up quite a bit ... and it's allowed our clients to access the market and meet their funding needs. It's basically been a function of issues having been put on hold for various reasons and the market's been more receptive, culminating in the $6.5 billion California issue last week."