This Slice of Muni Bond Market Is Prospering

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Minority- and women-owned dealers are riding high in the municipal bond market, defying the financial crisis that devastated state and city finances. The leading firms in that niche expanded staff the past two years and have doubled their share of the market since 2007, the Bond Buyer reports, citing Thomson Reuters data.

Many new hires came from bulge-bracket institutions - notably UBS, which shut down its municipal bond division in June of 2008. "Most of the larger minority-owned firms, including ourselves, dramatically increased our staffing with the onset of the financial crisis...," Suzanne Shank, president of the top-ranked minority-owned underwriter by volume, Siebert Brandford Shank, told the newspaper. "As soon as I saw UBS pull out of the business, I was on the phone trying to attract some of the talented bankers from that shop."

The second-ranked minority underwriter, Chicago-based Loop Capital Markets, more than doubled its staff of public finance bankers from 15 to 35 last year. Recently it brought on Alexander Rorke, an ex-UBS manager of public finance, to lead Loop's municipal banking group.

Boost From State and Local Policies

E. J. De La Rosa & Co., the third-ranked minority firm, whose business is centered in California, doubled its public finance team from late 2006 through the end of 2009.

Overall, the share of all municipal debt issuance lead-managed by minority- and women-owned firms climbed to 4.3 percent in 2009 from 2.1 percent in 2007 and 2.6 percent in 2008. Last year the firms ran the books on 200 deals valued at $17.7 billion, up 92 percent compared with 2007. Another dramatic sign of their ascent: last year's 10th-largest minority-run deal, $427 million, was "far bigger" than the largest such transaction in 2004, the Bond Buyer says.

Besides larger banks' exit from the municipal arena, the firms also benefit from state and local governments' policies that steer business their way. For instance, Illinois reportedly has had an "informal mandate" since 1989 to route 30 percent of its borrowing through minority-owned underwriters and bond counsel. In New York, a governor's task force issued new request for proposal guidelines in 2008 that, among other things, allow an issuing agency to require minority participation in underwriting its deals. Participation by minority firms in New York bond issues soared.

Over the past decade, Thomson Reuters data indicate minority firms managed or co-managed 25.8 percent of Illinois municipal deal value, compared with 13.3 for in New York and 14.2 for California.