CHICAGO Baltimore-based Legg Mason Wood Walker Inc. has lost its Philadelphia-based co-head of public finance Steven Genyk and Baltimore-based banker Sara G. Russell, the latest in a string of departures to hit the firm whose capital markets group is being shopped around and is reportedly close to being sold.
Genyk was a managing director and co-director of Legg Masons public finance group in the firms Philadelphia office. Genyk left last Friday and will join Bear, Stearns & Co. on Sept. 6, according to market sources. Russell recently resigned to join RBC Dain Rauscher Inc.s Baltimore office.
Genyk, who reported to Legg Masons manager of municipal fixed income James P. Fitzgerald, was a generalist who worked on financings for local and state governments, school districts, cultural institutions, health care, and higher education borrowers. Prior to joining Legg, he worked for A.H. Williams & Co.
Russell joined the firm in 1999 and specialized in multifamily, single-family housing, student housing, affordable housing and the higher education sector. She previously worked for the Federal Reserve Bank of Richmond.
The two departures come on top of a handful of others to strike the firm recently. Earlier this month, Nathan S. Betnun and Kenneth E. Powell defected to Stone & Youngberg LLC, while Wachovia Securities LLC snared two other bankers, William H. Bass Jr. and Laura E. Traynor.
Public finance sources yesterday suggested that the personnel losses and any potential additional ones would detract from the appeal of Leggs capital markets group to potential buyers.
In June, Citigroup Inc. and Legg Mason agreed to a $3.7 billion asset swap. Under terms of the deal, Legg Mason agreed to acquire Citigroups asset management business in exchange for its network of retail brokers and its capital markets group. The deal is expected to close in the fourth quarter.
Leggs retail broker network appealed to Citigroup, but the firm quickly began shopping around the capital markets arm, according to several public finance sources. Talks have intensified recently and a buyer for the group could be announced shortly, according to numerous sources. The departures have heightened the sense of urgency as they could compromise the price and timetable for a possible sale, according to people familiar with the matter.
Senior management at Legg Masons public finance unit had asked that employees stick with the firm until Aug. 1, the date they had expected to announce a buyer for the group. When that date passed without an announcement, the tide of departures began.
Citigroup would seem to have a great deal of motivation to sell the unit before the asset swap is finalized; if not, it would then face the choice of either integrating a group it doesnt want or absorbing the costs of dissolving it.
It is unlikely that Citigroup is interested in retaining Leggs entire investment banking group given that they have the resources of their own. I think it is reasonable to expect Citigroup to turn around and look to sell it off, said Matt Snowling, senior analyst at Friedman, Billings, Ramsey.
Legg Masons capital markets group represents a good opportunity for a firm looking to enhance its existing business or to enter the fixed-income business with an established team and a well-respected trading and sales operation. According to Snowling, who would not speculate on the names of potential buyers, the unit would be attractive to either smaller second-tier investment banks or a retail bank or foreign buyer.
Several public finance sources said the St. Louis- based regional brokerage and investment banking firm Stifel, Nicolaus & Co. is a frontrunner in talks with Citigroup and Legg. The company operates its main public finance operations out of Denver and has others in Illinois, Florida, Kansas, and Wisconsin.
The deal could be a good fit for Stifel given that it would not only increase its size and geographical reach, but Leggs capital markets group would also complement Stifels large retail operation, which in 2004 accounted for about 75% of its revenue, according to the companys annual report. Top officials at the company did not return calls seeking comment and several Legg Mason officials reached for this story declined to comment on reports of the potential sale. Spokespeople for Citigroup also declined to comment.
Leggs municipal fixed-income group accounts for about 80 of the more than 400 professional employees working in Leggs capital markets unit. Legg has public finance offices in Atlanta, Baltimore, Boston, Chicago, Florida, Houston, New Orleans, New York City, Minneapolis, Philadelphia, Pittsburgh, Camp Hill, Pa., Winston-Salem, N.C., and San Francisco. The firm has trading or underwriting desks in Baltimore, Chicago, Minneapolis, and Winston-Salem.
Nationally last year, Legg ranked 17th among firms, underwriting $2.8 billion of bonds, and 21st nationally among managers on negotiated deals, 15th in competitive transactions, and 12th among small-issue managers, according to data from Thomson Financial.
Stifel ranked 31st nationally among firms, underwriting $1.5 billion of bonds, 28th nationally among managers on negotiated deals, 42nd on competitive deals, and 19th among small-issue managers.
In the various regions of the country, Legg ranked 28th among senior managers in the Midwest, compared with Stifel at 24th. In the Northeast, Legg ranked 22nd compared with Stifel at 86. In the Southeast, Legg ranked 16th while Stifel ranked 51st. In the Southwest, Legg ranked 35th compared with Stifel at 17th. In the Far West, neither firm registered much underwriting work.
Legg Mason has built a solid reputation as a major player in the middle market since reorganizing its fixed-income operations five years ago with the aim of expansion. As part of the new business plan, it moved the base of public finance, institutional sales, and trading to Chicago.
Speculation has circulated that other firms interested in Legg include RBC Dain and the Royal Bank of Scotland. Sources close to RBC Dain said the firm has been recruiting Legg staff but is not in talks to purchase the entire capital markets arm intact. RBS officials declined to comment.
