While some firms in the municipal bond industry are merging, contracting or just plain closing, Tribal Capital Markets is doing exactly the opposite – it’s expanding into new spaces and hiring talented muni professionals with the backing of the Morongo Band of Mission Indians.
Tribal Capital is the largest native-America owned broker dealer in the U.S. It is 70% owned by the Morongo Tribe in California with managing partners Alan Mele and John Barry each owning 15%. It is certified as a minority business enterprise under the Tribe, which is a sovereign nation and has 1,110 members.
The 35,000 acre Morongo Indian Reservation near the San Gorgonio and San Jacinto Mountains in California was established in 1865. In 1983, the Tribe established a small bingo hall. Four years later the U.S. Supreme Court confirmed the rights of federally recognized Indian tribes as sovereign nations to offer gaming on its reservations.
Tribal Capital was formed in 2013 and funded with $7 million by the Morongo in the summer of 2014. It received FINRA approval in the fall of 2015. The broker-dealer arm of the firm was acquired and renamed after 22 years in operation as Blue Capital Securities.
The firm provides municipal and corporate investment banking, underwriting, sales and trading, and operates in other lines including mortgage-backed, corporate and agency bond trading, as well as in equities.
The firm’s clients include municipalities, Tribal Nations, pensions, money managers, registered investment advisors, non-profits as well as corporations, credit unions and trusts and foundations.
Today, with over $12 million of net regulatory capital, Tribal Capital has allocated up to $10 million to facilitate municipal debt underwritings, which means short-term underwriting capacity of up to $1 billion and long-term capacity of up to $143 million in a transaction.
“A differentiating factor with that capital is that we are willing to allocate it for client liquidity, which a lot of firms are not willing to do,” said Mele. “We’ve actually won a couple of significant pieces of business by being able to give people prices on the wire. They almost seemed surprised when they ask ‘Don’t you have to make some calls around?’ and we say ‘No, we kind of know what we’re doing and we’re willing to put our money where our mouth is’ and that has been successful for us.”
Both Mele and Barry have over 20 years of financial service experience. They are joined in New York by the newest additions to the team, managing directors Arjan Roghanchi and Jon Yamaoka.
Additionally, managing directors Kimberly Welsh in Idaho and Malcolm Jones in California both have more than 30 years of financial industry experience.
The firm originally started out with about 12 people and now employs about 32 and is looking to hire even more professionals as it expands into several other business lines. The firm wants to hire corporate sales people and traders, people who cover public funds, and those in the mortgage space.
“There isn’t a business line that we are not adding people to. We just need to find the right people,” Barry said. “But right now, our main focus has been in the municipal finance, capital markets business.
“We’ve made some great hires with Kimberly Welsh and Malcom Jones, primarily folks in investment banking for negotiated deals and tribal finance when those deals are getting done,” Barry added. “And with the recent addition of Arjan Roghanchi and Jon Yamaoka, [they add expertise in] competitive issuance as well as negotiated and secondary liquidity. Arjan and Jon bring with them a fair amount of experience in the secondary trading space but also a lot of relationships.”
Roghanchi and Yamaoka both started at the firm in late April.
Tribal Capital also has people in Florida, New Jersey, and Tennessee and would like to expand its team of professionals to about 40 in the next year or so, Mele said.
“We’re going to focus on bringing in municipal sales people and other people who can expand this business quickly,” Barry said. “Distribution is something we’re going to be able to focus in on.”
Barry stressed that the firm would like to help out the native American community as much as possible though its hiring – and is looking to bring on board people in the financial services industry who are native American.
“That’s one of the huge parts of what we are trying to accomplish,” Barry said, “and the Morongo want to help out.”
Roghanchi said the company was looking for good sales people to help with distribution as they expand the business.
“We’re really looking to building a full service municipal capital markets business -- origination, liquidity, distribution,” Yamaoka said. “The great thing about the platform here is that we’re combining the native American ownership with a real serious capital commitment. So we’re able to provide service to institutional customers to provide them with liquidity and on the issuance side we can seriously participate as co-managers in competitive syndicates and negotiated underwritings and be involved in terms of helping structure deals, price them, and distribute paper.”
Turning to negotiated underwriting, Welsh said the firm had been included in deals from Pennsylvania, and added to the underwriting teams in the states of California and Rhode Island.
“I feel the momentum is there with this unique capability,” she said. “It’s just really digging in -- and having this kind of capital in the diversity space is something that has already proved itself out to clearly differentiate us from the crowd and that is the critical part since there are still an awful lot of players chasing this business.”
“The entrepreneurial nature of Kimberly’s and my efforts was very attractive,” Jones said when asked why he chose to work at Tribal Capital. “The building of a municipal finance and tribal finance platform from scratch yet being embedded in a very strong existing platform was very appealing. The [Minority Business Enterprise] elements of our structure are appealing, but in the end it’s our ownership, the capitalization of the firm, the proven institutional distribution and the commitment the Tribe has made to us and the Tribe has also made in terms of encouraging us to do all we can to support native American Tribes across the country.”
The firm believes infrastructure financing and funding will be an important part of its business in the years ahead, but uncertainty reigns supreme at the federal level at the moment.
“Uncertainty breeds volatility which is where we provide service to issuers and customers,” Roghanchi said.
The primary source of income for the Morongo is gaming and it was the first Tribe in the United States to get involved in the gaming industry. The Tribe’s Casino, Resort and Spa in Banning, Calif., is one of the largest tribal gaming facilities in the United States.
The purpose of the Tribe's investments is to expand and diversify beyond gaming and the other companies that it invests in. Mele and Barry said the Morongo are in the financial business for the long-term.
The Tribe wants cash flow to be able to pay its members and its move to diversify away from gaming is something that makes sense, given the emergence of on-line gambling and the deregulatios of different states’ gaming laws.
“We have a commitment to the municipal business,” Welsh said. “We are in it for the long term.”
The firm echoes this in its statement of principles and social responsibility.
“We are a certified MBE and as such, strive to bring pride to our clients, investors, partners and community,” the firm says. “As a Tribal Enterprise we are grateful for those Tribal Leaders and Tribal Nations who sacrificed much and persevered for our generation. We are very fortunate to work with current tribal leaders who have the wisdom to contemplate seven generations into the future.”
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Corrected June 6, 2017 at 10:57AM: An earlier version misspelled Malcolm Jones' name.