Things don’t always get worse; they sometimes get better, as Russ Hindin, principal at the Woodland Hills-based investment banking shop Hindin/Owen/Engelke can tell you.

Hindin’s speciality is connecting small and medium-sized companies to capital.

Back in the early 1990s, Engelke was largely a financial firefighter, called upon by companies struggling to survive. A prime example was Simi Valley-based Fields Aircraft Spares Inc., which in the first part of the decade needed money to pay off debts incurred as a result of a leveraged buyout in the boom-boom ’80s. The company manufactures spare parts for the aircraft industry.

The recession nearly creamed the then-over-leveraged Fields, which at one point was losing 50 cents for every dollar of goods sold, said Hindin.

He managed to secure bank financing back then to keep the company afloat, which paid off some investors and got those debts off the books. On an operating basis, things weren’t so bad.

Now, the company expects an annual sales rate of more than double last year’s level (it’s looking toward $15 million a year).

The “problem” is to get working capital to finance the growth. Manufacturing companies that see a ramp-up in sales often face cash crunches as they build up inventories, or acquire new factory space, said Hindin.

Fortunately, the cash is there for growth.

“This is an excellent market to get capital, on better terms than we’ve seen in a long time,” said Hindin.

Like other veteran investment bankers, Hindin is almost in awe when reviewing the current capital markets. “I have never seen a time like this, in my 19 years in the business,” said Hindin, who started up Hindin/Owen/Engelke in 1968, and who was a commercial banker before that.

“There is abundant capital available, the banks are lending aggressively, on easier terms than ever. Many (medium-sized) businesses are able to get cash without onerous personal guarantees, or other covenants,” he said.

Private equity is an option too, said Hindin.

Indeed, times may be a little too good, according to Bruce Ballenger, principal with the Westwood-based Ballenger Strike & Associates, a management consulting firm.

“We are seeing too many managements who don’t stop to think that maybe they shouldn’t take on orders for product they can’t deliver,” he said.

Many businesses are having to scrape to get the money to finance production, but might instead think about turning away less profitable business, said Ballenger.

Whereas 70 percent of Ballenger’s work was in work-outs and distressed financial reorganizations a couple of years ago, more than 70 percent now is in helping companies secure growth financing, or restructuring old loans on better terms.

Ballenger thinks the seeds of recession may be sown in the too-hot growth many companies are experiencing. “The problem people have is hiring,” he said. “And skilled labor wages are going to start going up, leading to inflation.”

Local venture capital

As surveys by Coopers & Lybrand point out, Los Angeles County is something of the dog’s hind leg when it comes to getting venture capital.

Both Orange and San Diego counties, despite much smaller populations, eclipse Los Angeles in getting venture money, while Northern California easily dwarfs all of Southern California.

But there is an outfit in town steering money into local firms East-West Capital Associates in West Los Angeles, founded by Merv Adelson. Adelson, of course, is former chairman and co-founder of Lorimar Productions, and currently a board member at Time Warner Inc.

East-West stays within a fairly narrow focus: high-tech firms in the entertainment and media industries, generally on the production side of things.

“We are really big on the technology side of the media,” said Paul Nadel, East-West president. “We like to work with firms that we think we can help along, give them more than money, but to which we can add value and strategic advice.”

In the last year, East-West has invested in five Los Angeles-area companies, with each investment in the $1.5 million to $5 million range.

Among the investments: a software company working on high-resolution graphics, a digital imaging company, a publisher utilizing digital versatile discs (DVDs), and a company that enables digitized downloads of film and video from remote locations, without loss of quality.

“We expect to invest in four to six companies a year, largely in Los Angeles,” said Nadel.

In addition to having the heavyweight Adelson on board, East-West has formed Wasserstein Adelson Ventures L.P., a $135 million venture fund, to seek out investment. That’s Wasserstein, as in Wasserstein Perella & Co., the big New York-based investment shop.

Worthy of Salomon

Last week Wes Walraven was named managing director of mergers and acquisitions in the Los Angeles offices of Salomon Bros., which they are now calling Salomon Smith Barney, due to the recently finalized merger.

Though only 35, Wallraven is already an 11-year veteran of the industry, having worked for nine years at First Boston, and at Salomon since August of 1995.

Like nearly everyone else in the mergers game, Walraven said there are more deals than he can shake a stick at. “The last two months have been my busiest time in 11 years in the business,” said Walraven, who holds an MBA from the Kellogg B-school at Northwestern University.

The ferocious level of mergers in 1997 will not abate in 1998, predicted Wallraven. “Banks are willing to loan money, very aggressively, to fund mergers, and the high-yield (bond) market is very strong. I think we are going to continue to see consolidations,” he said, referring to the practice, prevalent in many economic sectors, of companies buying other companies within the same industry to gain market share or economies of scale.

“I suppose it’s got to slow down sometime, but not yet,” Walraven said.

Contributing reporter Benjamin Mark Cole writes about the Los Angeles investment community for the Los Angeles Business Journal.