Drexel Lays Off Thousands; Fire-Sale Continues With PM-Drexel-Employees, Bjt
NEW YORK (AP) _ Drexel Burnham Lambert Inc. fired thousands of workers today as the former junk bond powerhouse continued dismantling as part of the largest bankruptcy filing in securities industry history.
″There are some tears today. We all regard it as a real shame and a tragedy,″ said John E. Oden, director of institutional placement in Drexel’s real estate division in Beverly Hills, Calif. ″I feel like it could have been prevented.″
Drexel spokesman Steven Anreder said letters of termination were sent to the bulk of Drexel’s 5,300 workers today. The remaining employees - from investment bankers to secretaries - will stay on temporarily to finish pending business.
″You’ve got assets here,″ Anreder said. ″We still (have to) negotiate, try to straighten things out, real estate to unload.″
The investment firm said it was completing severance packages for most of the fired workers, which included the 400-member Beverly Hills junk bond division.
The operation long headed by Michael Milken was largely responsible for the firm’s rise from the margins of Wall Street to billion-dollar profits and subsequent decline amid crushing scandals of the late 1980s.
The high-yield bond division was devastated last year by the departure of Milken after his indictment on fraud and racketeering charges, and the subsequent collapse of the junk bond market.
Meanwhile, most of Drexel’s multibillion-dollar Treasury securities portfolio was liquidated by Thursday, aided by a rise in bond prices in the past week, Drexel executives said. The firm’s junk bond holdings, estimated to be worth about $1 billion, were being dumped below market value.
″There are parts of this business that are still good and represent value, and those will be disposed of in an orderly way,″ said Alan Miller, the bankruptcy lawyer handling the case.
Across Wall Street, competing firms picked at Drexel’s carcass to evaluate what holdings might be worth taking over. Soon to be ex-Drexel employees were said to be job-hunting alone and in groups of up to 50 people.
″Sure we’re looking at their clients. They had lots of good people working there as well,″ said Joel Cohen, head of mergers and acquisitions at Donaldson, Lufkin & Jenrette Securities Corp.
Arthur Kirsch, chief of Drexel’s worldwide equity business, told his 600- member division he still was trying to arrange for a mass movement to another firm. Employees and analysts were skeptical that would happen to Drexel divisions, which consist of people and contacts - not products.
″I think it’s a great proposal but nobody will buy it,″ said Perrin Long of Lipper Analytical Services.
″Lincoln supposedly did away with slavery with the emacipation proclamation,″ he said. ″You can’t sell people.″
Drexel itself has all but abandoned hope of getting any value for its divisions.
″We’re more interested in seeing these people get settled and continue on with their professions,″ Anreder said.
Indeed, the commodity trading firm Balfour Maclaine Corp. said its London subsidiary had acquired Drexel’s cocoa trading unit for free. Balfour got the unit’s half-dozen employees and agreed to liquidate its cocoa positions.
The securities industry has lost 35,000 people since the October 1987 stock market crash. Only Drexel’s most talented players - Long estimates as few as 10 percent to 15 percent - are expected to land jobs.
″You’re zeroing in on the top people in investment banking, commodities, research and a few in trading,″ he said.
In other developments in the Drexel case:
-The U.S. Trustee handling the bankruptcy, Harold Jones, set Feb. 27 for the first meeting of unsecured creditors of Drexel Burnham Lambert Group Inc. The company has listed liabilities of $2.89 billion against assets of $3.7 billion.
-U.S. Bankruptcy Judge Howard Buschman III gave Drexel 30 days to file a complete list of creditors and 90 days to file details of assets, liabilities and financial affairs.
-Miller said payment of $150 million still owed by Drexel and its parent to a Securities and Exchange Commission fund to compensate injured investors would wait like all other claims. Drexel ″will have to deal with the obligation when it becomes due, otherwise they have to find some other solution,″ the Drexel attorney said.