Fate of 400 Drexel Staffers Still Up in Air
A number of Los Angeles brokerage executives said Wednesday that they expect to hire workers from Drexel Burnham Lambert in coming months despite an industry slowdown that has caused major staff cutbacks in the East.
Still, many question whether the Southern California brokerage industry is strong enough to handle an influx of about 400 people who are likely to be pounding the pavement within a matter of weeks. While Drexel, whose parent company filed for bankruptcy protection late Tuesday, is not saying how soon or how many Beverly Hills workers will be laid off, company executives said privately that they believe everyone will be gone within two weeks.
Workers, desperate to find jobs in a slack market, were faxing their resumes to other big brokerage houses, industry executives said.
But even the firms that are talking about “aggressive hiring” speak in terms of relatively small groups of people--typically under a dozen--rather than hundreds.
“Bear Stearns and other big firms will take some of the key players,” said Richard Zander, president of Zander Associates, a Century City executive search firm that specializes in the brokerage industry. “But the support staff, the younger members, the lower producers, I would guess these people will have a difficult time finding jobs.”
Several firms--including Sutro & Co., Bear, Stearns & Co. and the smaller regional house of H. J. Meyers--said they plan to hire aggressively. However, none would give exact figures on how many Drexel employees they would be willing to snap up.
“Let’s say we are taking an open-minded approach,” said Lloyd Greif, vice chairman and managing director of corporate finance at Sutro & Co., Los Angeles.
Added Michael Tennenbaum, vice chairman of investment banking at Bear Stearns: “I think the likelihood of adding a substantial number of people will depend on whether a group with a specific business expertise wants to move.”
Bear Stearns is also interviewing individual brokers, traders and investment bankers, Tennenbaum said. But before Drexel’s news, the company considered itself fully staffed, so it will only hire those it considers exemplary or those who will be able to expand Bear Stearns’ business.
Industry sources said the approximately 400 workers at Drexel’s Beverly Hills offices have been frantically searching for work since Drexel first announced the depth of its problems two days ago.
The firm had previously been losing workers as top investment and corporate bankers became disillusioned with the company’s tarnished image and diminishing influence on Wall Street. While Drexel was once the most prominent firm in the specialized arena of high-yield debt financing, it had been losing customers and market share in recent years. IDD Information Services, for example, said Drexel’s share of the junk bond market fell to 38.7% in 1989 from 55.2% in 1985.
“People have been coming out of Drexel in waves over the past year, but right now it is a tidal wave,” Sutro’s Greif said.
Meanwhile, Drexel employees are also grappling with a number of other unanswered questions, including what will happen to their deferred compensation and pension plans. Normally, pension plans would not be affected by a bankruptcy, said Richard M. Neiter, senior attorney at Stutman, Triester & Glatt in Los Angeles.
However, deferred compensation is another matter. Employees are typically second to be paid off in a bankruptcy, only after payments to bankruptcy administrators. However, their high-priority claim only applies to $2,000 in wages, salaries and commissions. Those owed more than that become unsecured creditors.
Finally, many employees had been persuaded to take Drexel stock in lieu of cash compensation, and these people are likely to lose the bulk--if not all--of their investment.
