CHICAGO - When Cleveland C. Brooks founded Ohio's first minority-owned investment banking firm in 1987, his company was as local as his first name.
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Thirteen years later, SBK-Brooks Investment Corp., is still based in Cleveland, but now has branch offices in Detroit, Chicago, Milwaukee, Philadelphia, Houston, and Little Rock, and is reopening an office in Indianapolis.
But SBK-Brooks' base and trading desk remains on the banks of Lake Erie, where the company has helped underwrite the city's remarkable rebirth.
"They have a very strong Cleveland-oriented franchise and have really expanded it to something more national in scope," said Gene Saffold of Salomon Smith Barney Inc., who worked with SBK-Brooks when the firm served as co-manager on Chicago Public Schools deals. "They've done a fine job at creating a national corporation."
With a staff of 16, SBK-Brooks is still relatively small. But its experience is growing.
Brooks, who died in 1998, turned over the leadership of the firm to Eric L. Small in 1994. In the past four years, the firm has underwritten 130 municipal deals totaling $15 billion, mostly as a co-manager, the firm said. But in the past two years, the firm has senior managed $125 million of municipal deals, and it hopes to build on that figure.
Two years ago, SBK-Brooks scored a personnel coup when it hired William E. Matlock, former deputy director of investments for the Ohio state treasurer, to head up the firm's public finance division.
Matlock's presence will help build the company's status in municipal underwriting, according to market observers.
"The important thing is that they have a strong banking background, which they get from Bill Matlock," Saffold said. "I think as they continue to build upon their banking capabilities, as they've done, they'll see more and more senior management positions."
"Both Bill and Eric are outstanding individuals, as well as bankers," said Raymond C. Headen, a bond attorney with Thompson, Hine & Flory who worked with Matlock under former Ohio Treasurer J. Kenneth Blackwell. "They're certainly well-positioned to grow in the Midwest."
BLAZING A TRAIL
Born in Aiken, S.C., Brooks became an orphan at the age of two and spent the Great Depression in a Brooklyn, N.Y., orphanage. After serving in the Marine Corps in World War II, he earned a degree in finance and banking from Indiana University.
Upon graduation in 1950, he became one of the first African-Americans hired by Dun and Bradstreet Corp., and afterward became the first black bank manager at Cleveland Trust -- now a unit of Keycorp -- before founding Brooks Securities Inc.
"Cleve was a real trailblazer all his life," Small said.
Small and Matlock first met Brooks in the 1980s, Small through a family connection and Matlock through the bank.
Small, 45, had served as senior investment director with the bond investment department at Aetna Life and Casualty and as a financial management consultant at Arthur D. Little Inc.
Matlock, who gives his age only as "older than Eric," had served as senior treasury and investments officer at Ohio State University before being recruited by Blackwell. Before his term at Ohio State, Matlock managed municipal and institutional debt financing for Banc One Trust Co. and alongside at the bank where Brooks worked.
Small joined Brooks' firm in 1991 with the understanding that he would eventually take over. The firm's Chicago office opened in 1992.
Other principals at SBK-Brooks are Derek T. Batts, senior vice president and head of the Detroit office, Sheilah M. House, managing director in charge of sales, trading and underwriting, and Robbi J. Jones, managing director in the Houston office.
THE TOUGH DEALS
Among the recent deals in which Small and Matlock express pride are two complicated public-private transactions that they feel have helped Cleveland's recovery.
Small recalled a particularly hairy deal last year that restructured $14.4 million of debt for the National Terminal project, the largest apartment complex in downtown Cleveland. The bonds were issued as tax-exempt multifamily housing bonds in 1996, but problems arose between parties to the deal, Small said. Asked to elaborate, he said, "there were a lot of problems," then shook his head.
"We restructured the transaction and subsequently reissued it," Small said. "The challenge was that it was a very complicated transaction with many, many parties involved that needed to be satisfied."
Another recent Cleveland deal was a $6.5 million bond issue for a community center to train welfare recipients for work. The deal involved the coordination of several different parties because the building is leased by the issuer, Cuyahoga County; has a loan from the city; and has a letter of credit from Bank One Corp. The Mt. Pleasant Now Development Corp. owns the building.
Small said that being a minority firm sometimes opens doors, particularly in cities like Chicago that have minority participation policies. But the door only stays open if the firm performs well.
Issuers who have worked with SBK-Brooks praise their professionalism and technical support.
"They've done a fine job for us -- we got great support from their staff," said John Tomei, Akron, Ohio, city treasurer. "I also deal with SBK-Brooks on the flip side of the coin, in that we've purchased investments from them. Their rates are very competitive."
Small would not disclose the size of the firm's capital base, saying only that it has the facilities to senior manage deals "beyond seven figures."
A small regional firm like SBK-Brook's faces "a lot of competition," Small said. "I think there is a tendency to drift toward the New York firms," he added.
Matlock said that while race is less of an issue, "there's also a tendency to drift toward what you know."
"The public finance world tends to be predominantly white and male," he continued, "and they tend to go with whom they know. This has started to burn off a bit as we develop more of a presence."
Matlock noted that his own experience as an issuer helped break down barriers. "I was brought into the state treasurer's office for that particular reason, to give some exposure, and some color, if you will, to the establishment which is the state treasury. I was the only African-American ever to hold that position."
Having grown up on Chicago's South Side, Small said he is proud to be underwriting deals in his hometown. "When I was 23 years old, working at Harris Bank on LaSalle Street, I used to look out the window and say, 'Someday I'm going to have my own office on LaSalle Street,'" he recalled with a smile. "And now I got it."
