Soichiro Kurachi, a vice president manning the Japan desk in Merrill Lynch & Co.'s high-yield bond group, had seen a window of opportunity for a long time.
Recent investigations into Merrill's junk bond operations helped lead him to the door, according to Mr. Kurachi, who left Merrill Lynch earlier this week to start his own firm.
"When you are happy with a firm, it's very difficult to leave," he said.
His new firm -- Japan Capital Associates -- is the first Japanese investment banking boutique of its kind, he said.
Japan Capital will specialize advising and assisting clients in the distribution of high-yield bonds and other securities to institutional Japanese investors, both in the United States and Japan.
The boutique will provide its services to U.S. and other non-Japanese investment bankers, commercial banks, and leveraged buyout boutiques that currently lack such a distribution network, a spokesman for Mr. Kurachi said.
Mr. Kurachi is currently on his way to Japan. His firm, which will be based in New York and Tokyo, will likely open for business in April. Before joining Merrill Lynch, Mr. Kurachi was worked at Drexel Burnham Lambert.
The Securities and Exchange Commission and Justice Department are reportedly investigating alleged improprieties involving Merrill Lynch's high-yield department. Merrill Lynch has "categorically" denied any wrongdoing, according to a statement issued by the firm.
A Merrill Lynch spokeswoman said he left "on good terms."
"We're sorry to see him go and we wish him well," she said. Asked if the firm planned to replace Mr. Kurachi, the spokeswoman replied, "We're evaluating it."
Market News
In secondary trading yesterday, better quality high-yield bonds lost 1/4 to 1/2 point, while distressed names lost approximately the same amount depending on the issue. Exceptions were gainers News Corp and Inland Steel Co. High-grades declined with Treasuries, which lost 5/8 point in the 10-year sector and 7/8 point at the long end.
Stone Container Corp. issued $200 million of 10.750% senior subordinated debentures due 2002. Noncallable for five years, the debentures were priced at 99.50 to yield 10.831. Bear, Stearns & Co. lead managed the offering. Moody's Investors Service rates the offering B2, while Standard & Poor's Corp. rates it B-plus.
Lyondell Petrochemical Co. issued a two-part offering totaling $200 million. Tranche A consisted of $100 million of 8.250% notes due 1997. The noncallable notes were priced at 99.757 to yield 8.31% or 135 basis points over comparable Treasuries. Tranche B consists of $100 million of 9.125% notes due 2002 at par. The noncallable notes were priced to yield 155 basis points over comparable Treasuries. Moody's rates the offering Baa3, while Standard & Poor's rates it BBB-minus. Lehman Brothers lead managed the offering.
Bear Stearns Companies Inc. issued $150 million of 8.750% senior notes due 2004. The noncallable notes were priced at 99.792 to yield 8.778% or 120 basis points over 10-year Treasuries. Moody's rates the offering A2, while Standard & Poor's rates it A-minus. Bear Stearns lead managed the offering.
Minnesota Power & Light issued $60 million of 7.375% first mortgage bonds due 1997. The noncallable bonds were priced at 99.334 to yield 7.537% or 55 basis points over comparable Treasuries. Moody's rates the offering A2, while Standard & Poor's rates it A-minus. PaineWebber Inc. solemanaged the offering.
Moody's downgraded Olympia & York Water Street Finance Corp.'s secured notes to Ba1 from Baal. The lowering, which follows the review for a possible downgrade announced Dec. 4, concerns only the non-recourse, secured notes, and does not represent Moody's credit opinion of the issuer's parent, Olympia & York Developments Limited. That company, which is not rated, is a privately held real estate and investment banking company based in Toronto, Canada.
Moody's has assigned (P)Ba1 senior and (P)Ba3 subordinated ratings to The Vons Companies Inc.'s $375 million shelf registration. The ratings, which are prospective, reflect the company's leading market position, improved operating results, and the "positive implications of the planned debt financing," according to a Moody's release.
"The shelf filling will provide financial flexibility and should lead to an improvement in the company's overall performance through interest expense savings," the release said.
Duff & Phelps has given BankAmerica Corp.'s $500 million two-part note issue an A rating.
"The rating recognizes the solid financial condition of BankAmerica Corporation," a Duff & Phelps release said. "Earnings power is superior while a strong balance sheet reflects the corporation's sound capital structure, large reserves, above average asset quality, and large core deposit base base," the release said.
