Sell Side

More Firms Start Muni Teams

It must be “Build or Expand Your Muni Team” week.

Despite tax-exempt volume droning along at an 11-year low while governments struggle to cut spending and limit debt issuance in a high interest-rate environment, financial firms continue to sense opportunity in public finance.

One day after Guggenheim Partners said it formed a new four-person team of underwriters, two other small firms announced the launch of public finance teams and one major player announced a couple of new hires.

CastleOak Securities LP said Thursday it had hired six municipal finance specialists to create an institutional sales and trading team.

David Jones, chief executive at the New York-based boutique investment bank, said fixed-income investors have been gravitating towards more secure debt recently, including municipal bonds. Munis have become attractive to crossover buyers because they offer comparatively high yields backed by strong pledges, so firms are getting in on the action to exploit opportunities.

“The trend of the past couple of years has been a flight from the larger bulge-bracket firms to the smaller ones,” Jones said. “This is not just in municipals — a lot of the smaller firms are finding it easier to hire talent.”

One factor for the migration may be compensation, Jones added. Larger firms are under pressure to limit compensation, which helps smaller firms to be more competitive. He also said the payment structures at small firms are also appealing as they are often based on the eternal king: cash.

CastleOak’s Midwest-based group is led by three core members from SBK-Brooks Investment Corp., a minority-owned firm that merged with Oakland-based Blaylock Robert Van in August 2008.

Eric Small, formerly the CEO at SBK and an executive vice president at BRV, was named senior managing director based in CastleOak’s Cleveland and Chicago offices. He is a 30-year capital markets veteran who spent 15 years at SBK, where he oversaw a staff of 22 professionals.

Joining him from the SBK team are managing directors Nick Potonak and William Matlock.

Potonak, based in Cleveland, has 28 years of institutional sales experience in taxable and tax-exempt bonds. Prior to SBK, where he was lead underwriter, he managed the fixed-income sales desk for the now-defunct retail brokerage Tucker Anthony Sutro.

Matlock, based in Columbus, Ohio, brings 25 years of experience in public- and private-sector investments. Before serving as a senior vice president at SBK, he was a deputy director with the Ohio Treasury for four years.

The CastleOak team is rounded out by two directors, Matthew Middendorf and Gregory Reynolds, who are based respectively in Cleveland and Indianapolis. Jonathan Ly was named the group’s financial analyst in Chicago.

Berenson & Co. announced Thursday its entry into public finance with the launch of a debt capital markets platform to complement the firm’s mergers and acquisitions advisory practice.

The team is led by vice chairman Christopher Johnson and managing director Jack Lucid.

“Moving into the public debt markets is a natural extension of our existing capabilities,” said Jeffrey L. Berenson, chief executive, in a press release.

The private investment bank has offered private placements of debt and equity since its founding in 1990. It was recently granted approval by the Financial Industry Regulatory Authority to execute public underwritings of debt and equity.

“Chris and Jack have played important roles in hundreds of public financings and, combined with our long history in the credit markets, that expertise creates a best-in-class DCM platform,” Berenson said.

Johnson brings 26 years of experience to the new role. He spent the last decade leading efforts in the restructuring advisory group for the Americas at Deutsche Bank Securities. He also spent 15 years at Merrill Lynch, where was co-head of global leveraged finance.

Lucid comes from Akarui Capital Partners, a non-investment-grade specialty firm, where he was chief executive and a founding partner. He previously was head of loan capital markets at Jefferies & Co.

RBC Capital Markets — the seventh-largest senior underwriter and fifth-largest co-manager nationwide — plans to announce Friday that Citi veterans J.J. Ament and Hing Loi were named directors in their growing muni finance group.

Ament, a recent candidate for Colorado treasurer, was a director of public finance in Citi’s Denver office for four years. At RBC he is charged with covering large issuers in Colorado, Missouri, Kansas, and Utah.

Loi is best known for his 21 years at Citi, where he was investment banker in student loan finance until 2008. He spent the last few years as chief risk officer for Fynanz, a people-to-people lending firm for students.

Chris Hamel, head of municipal finance at RBC, said there’s nothing odd about building out the platform during a period of low issuance.

“I view the opportunity as a long-range one,” Hamel said. “When quality individuals come along … you do your best to recruit them to the platform, realizing there is always going to be a cycle of volume and issuance.”

RBC already employs one of the largest municipal teams in the market with more than 340 professionals serving in 26 cities. Hamel hopes the team grows even more in the coming months as the firm prepares for more issuance in the years ahead.


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