BENJAMIN MARK COLE
The Trading Edge, the online marketplace for high-yield bond traders, continues to sign up customers and win new financing.
Founder Murray Finebaum says he has more than 150 accounts, primarily junk-bond money managers who already make up a majority of the junk-bond market in terms of dollar-holdings.
Finebaum, the chairman and chief executive, has had his hands full just hiring people. “We have about 30 (employees) right now, but we will hire 150 to 200 in the next 18 months,” he said. “So much for running a nice little shop.” An office in New York also is in the works.
The blue-chip venture-capital crowd is rushing to help Finebaum, with Palo Alto-based Technology Crossover Ventures investing $23.6 million in late May to back up earlier investments made by Brentwood Venture Capital and Media Technology Ventures.
Through an online portal called Bondlink, registered bond owners can view buy-and-sell quotes on bonds, in anonymity then execute a trade, with neither buyer nor seller revealing his or her identity.
Trading Edge (which holds a broker/dealer license) makes money only by charging a fee for trading and will install the terminal and necessary software for free.
It is a radical change. Back to the Civil War and beyond, bond owners generally have had to trade through brokerage bond traders, who knew the buyers and sellers, and kept inventory. Brokerages, of course, keep market information secret, including identities of would-be bond sellers or buyers, and actual prices, meaning bond owners more or less groped in the dark.
“If you wanted to sell a bond, you made four or five phone calls to brokerages,” said Finebaum. In this scenario, information is quite literally translated into power power for brokerages as middlemen.
Certainly there is the potential for Trading Edge or other Web sites to supplant the costly brick-and-mortar brokerage community as the trading arena for bonds.
Finebaum was circumspect about that prospect. “I think we will augment, not supplant brokerages,” he said. “The brokerages should like us, and they are our customers also. After all, they own bonds; they buy and sell, too. We provide real-time information, and liquidity for the market.”
Armed with the fresh cash from Technology Crossover Ventures, Finebaum said he is readying an announcement for a new push into the debt of emerging-market nations, with a run at ordinary corporate bonds still off in the future.
In past professional lives, Finebaum has been an executive at Cantor Fitzgerald (the big bond house), vice chairman of the National Association of Securities Dealers, and a managing director with the former Dabney Resnick brokerage (now Imperial Capital LLC).
Planet HLHZ
When it comes to providing independent evaluations of corporate worth in restructuring, bankruptcies or mergers, Century City-based Houlihan Lokey Howard & Zukin is huge.
So it wasn’t much of a surprise when the unofficial bondholders’ committee of Planet Hollywood Inc. turned to Andrew Miller, HLHZ managing director, now that the restaurant chain stopped making payments on $250 million worth of corporate IOUs.
Miller was tightlipped last week about the new assignment, but laid out the basics of most such cases. “In general, most holders of defaulted securities seek to maximize claims. We advise them regarding the value of the debt, and possible restructuring alternatives.”
Typically, HLHZ number-crunchers sign confidentially agreements with a troubled company while not only reviewing public disclosures but also examining inside details and conducting interviews with company executives. After several weeks or months, depending on schedules, HLHZ prepares a report for bondholders.
Miller has a dilly on his hands with the Orlando, Fla.-based Planet Hollywood. Brokerage Bear, Stearns & Co.; underwrote the bonds a mere 15 months ago, but evidently the chain’s popularity is sinking into the lower orbits, with first-quarter, same-store sales plunging by 22 percent.
When Planet Hollywood went public in 1986, the plan was for celebrity shareholders like Arnold Schwarzenegger and Sylvester Stallone to boost business with live appearances. The restaurants tended to open successfully, but business tapered off once the stars went home. One analyst with brokerage Cowen & Co. recently called Planet Hollywood food “bad” and said its name had become “an anti-brand.”
Miller, who holds a law degree and an MBA, has been with HLHZ eight years, and was a consultant with Bain & Co. before that. In between assignments sizing up company assets, he finds time to teach law and finance at UCLA.
Short takes
Careside Inc., the Culver City-based developer of point-of-care blood testing systems, may complete its initial public offering this week of 2.5 million units (a unit is a share and warrant to buy another share).
The company expects to raise about $15 million, though theoretically it could raise up to $35.2 million if the warrants were exercised.
Careside makes a small, portable blood analyzer that can run 31 different tests and provide onsite results in 15 minutes or less. The funds will be used for a commercial launch of the tester. Brokerage Wedbush Morgan is the lead underwriter
Encino-based Digital Corporate Profiles Inc., the financial relations firm that creates CD-ROMs and Web connections for publicly held companies, announced it has a new investor relations CD-ROM out on Intimate Brands Inc., the parent company of Victoria’s Secret. The silver disc includes 18 minutes of video with a segment on the Miracle Bra as well as financials, audio and graphics
Sutro & Co. Inc.’s REIT research team, Craig Silvers and Katherine Flores, has decamped from its Westside offices and set up shop at 555 S. Flower St.
Contributing Reporter Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at [email protected].
