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The Bond Buyer
Popular Securities Opening New York City Office
By Susanne Walker
February 26, 2004
CHICAGO -- Popular Securities, the brokerage subsidiary of Puerto Rico-based parent company Popular Inc., on March 15 will open up a municipal sales and trading desk in New York City at 120 Broadway.
Ken McGrath, Popular Securities president and chief executive officer, and Greg Kaufman, managing director at Popular Securities, declined to comment on specific staff, noting only that the desk will launch with about five people and will expand to about 10 when sales people are added.
However, industry sources say the unit will include former and current municipal specialists from the former Prudential Securities, now merged into Wachovia Securities Inc. Those sources said that Evan Rourke, former first vice president at Wachovia, and Alan W. Murphy, currently senior vice president at Wachovia, will be among the new hires. Murphy confirmed that he will be a managing director and head of the New York office.
Rourke, who left Wachovia earlier this month, declined to comment. Murphy, still at his Wachovia office, also declined to comment.
McGrath said Popular Securities decided to enter the U.S. municipal market now because "the municipal business is a really stable business. State and local municipalities will always need access to the capital markets," he said.
In addition, the brokerage firm also has tapped the "right people," he said. The firm already has experience in Puerto Rico in investment banking, sales, and trading, he said.
On the institutional and retail side, Popular Securities handles bond issues for Puerto Rico and local corporations. In 2003, Popular Securities served as lead manager on one issue in the U.S. for $381.7 million, according to Thomson Financial. It was co-manager on 14 issues on the mainland totaling $5.42 billion.
"We do have a substantial amount of capital and a large and well-capitalized parent," Kaufman added. "We could easily underwrite a $500 million deal without requiring outside additional capital."
Fitch Ratings analyst Ileana Cervantes said on Tuesday that the launch of a muni trading desk would indicate a move to diversify revenues. She said the firm's parent company, Popular Inc., has in the last few years been diversifying its earnings stream both geographically and revenue-wise. The firm has been making a lot of inroads in other areas and have been focusing on expanding in the U.S., she said.
Banco Popular, a subsidiary of Popular Inc., in the late 1970s to the early 1980s had an office in New York in which it traded primarily Puerto Rico municipal bonds. The office had about two or three salespeople and no investment banking staff and was later closed, McGrath said.
Popular Securities initially plans to sell bonds to the institutional market, but expects to build on its in-house retail base. The firm will be targeting issuers across the U.S. and will be active in doing both revenue and general obligation bonds.
Kaufman said Popular Securities does not plan to avoid any particular sector. He added that the health care sector is going through "a very difficult time," but the securities firm would look at a properly structured deal with an attractive credit rating.
The firm also expects to market structured products "wherever we see value," Kaufman said. It will also be structuring tender option bond programs and expects to market separately traded registered interest and principal securities, or STRIPS.
The firm's parent company traditionally has targeted the growing Hispanic market in the U.S. Popular Securities will also follow that model on the retail side and will also follow the footprint of Popular Inc., which currently has offices in Chicago, California, Texas, and Florida, as well as New York, where it has its largest presence. The bank has 98 branches in the U.S., 48 of which are located in New York and New Jersey. A number of underwriters agreed that Popular Securities' foray into the municipal market would mean more liquidity for municipals -- and that generally means good things for the industry. Popular Securities was developed out of the former CS First Boston Inc.'s Puerto Rico-based investment banking operations. CSFB sold that business in 1995 amidst a major restructuring.