Wsw/dec28/26″/mike1st/mark2nd
BENJAMIN MARK COLE
If there is such a thing as an L.A. securities lawyer who carries a lunch pail, then it must be Leib Orlanski, the tireless, nut-and-bolts partner at Beverly Hills-based Freshman Marantz Orlanski Cooper & Klein.;
Between working on small to medium-sized mergers, private placements, initial public offerings, or convertible bond offerings, Orlanski always seems be have his hands full with a couple of deals.
Orlanski was true to form last week, working for Camarillo-based Jetech Data Systems Inc. in helping structure $7.5 million in venture funds from Brad Jones’ boys at Brentwood Venture Capital, while simultaneously cooking up a merger of a Southern California burger chain.
“The meat is not done yet so I can’t talk about it,” said Orlanski.
The good news from Orlanski (who tends to have good news) is that while the IPO market is dry, the guys with venture capital have kept the cash flowing.
“The IPO market is virtually shut down for a company like Jetech, but the VC market is thriving, and we received a very good valuation from Brentwood Venture Capital,” said Orlanski.
Orlanski graduated from USC law school in 1967, although he quickly points out that he was an undergraduate at UCLA. He worked at Mitchell Silberberg & Knupp before joining Freshman Marantz, making partner in 1972. In securities circles, Orlanski is known for a nut-and-bolts approach to getting a deal done, and for working in deals in the $2 million to $50 million range, sometimes larger.
“If you get the deal done, that speaks for itself. If you don’t, that speaks for itself too,” he said.
Jones confirmed Orlanski’s take on the venture capital market.
“We invest for the long term and we try to invest in solid product with solid management, who are addressing real market needs,” said Jones. “We are not worried whether the public market (issuing IPOs) is available right now.”
In most cases, Jones is looking for an IPO, or business sale, in a one- to five-year period, he said.
“In Jetech’s case, it may come sooner, as they are pretty far along, a profitable company reaching a critical mass.”
Junk on speed
Speaking of lawyers, Ken Baronsky, partner with blueblood firm Milbank Tweed Hadley & McCloy in downtown Los Angeles, found himself ushering not one, but two junk-bond deals through the birth process in December. Yes, we said junk.
Of course, most investors have stiff-armed non-investment-grade corporate IOUs since summer; indeed on the worst days of the Asian crisis the only bonds that really traded were those issued by the U.S. government.
The flight to quality meant certain junk issues offered effective yields of more than 25 percent and still buyers were scarce. But Baronsky managed to help sell two junk-bond issues in mid-December within 24 hours, and even helped one deal get done in seven days from inception of idea to sale of securities.
“When the market window for junk finally opened, the issuers simply exploded through it,” said Baronsky. “Companies wanted to raise money before the holidays and before rates possibly changed.”
On deal No. 1, Baronsky structured a $200 million bond offering for Las Vegas-based Station Casino Inc., owner of four casinos in Nevada. “The interest rate environment is very favorable. We priced it at 8.875 percent,” said Baronsky, despite the non-investment-grade rating.
Underwriter Merrill Lynch committed to do the deal in 24 hours, and sold it within seven days to institutional buyers who were familiar with Station Casino’s earlier debt offerings, said Baronsky.
The next day, Baronsky was lead lawyer on a sale of $100 million in junk by Miami-based Neff Corp., a business equipment rental company, with Donaldson, Lufkin & Jenrette Securities Corp. acting as lead underwriter. The lesser-known Neff it went public in May, and the stock is down paid 10.25 percent for its money, said Baronsky, who on that issue worked for DLJ.
The two deals indicate that the market has opened up again for non-investment-grade debt, and Baronsky expects he will be swamped in the first quarter of 1999.
“All those deals that didn’t get done in the summer and fall now they are going to be coming to market. I am looking at a very busy calendar.”
Thinking caps on
If you’ve driven down La Cienega Boulevard headed toward the Santa Monica (10) Freeway, you perhaps have noticed the mysterious “Idea Man” storefront, and wondered what went on behind the facade.
Answer: Promotion and marketing, and enough of it so that the New York-based HA-LO Industries Inc., a publicly held company, last week announced it had purchased the privately held Idea Man Inc. Terms not disclosed, said David Herman, managing director with Houlihan Lokey Howard & Zukin, the investment banking and evaluation shop based in Century City. Herman signed on to help Idea Man, in business 27 years, become part of yet another “industry roll-up” investment banking jargon for industry consolidation.
HA-LO is a national distributor of promotional products, and it’s on an acquisitions rampage. Indeed, Herman said the Idea Man deal is the third merger in the marketing and promotion business that HLHZ has worked on recently.
Bonds of plenty
Convertible bonds had a good November, as bonds rallied from depressed levels of summer and fall. According to an index put together by Westwood-based money manager Froley Revy Investment Co. Inc., as a group, convertible bonds returned 3.4 percent for the month, of which 3.02 percent was principal, and 0.38 percent was interest. For the year, convertible bonds have yielded 5.67 percent, of which 0.95 percent was bond appreciation and 4.72 percent was interest. Convertible bonds, generally issued by small-cap companies, have not fared too well in the late 1990s, as small-cap stocks lagged blue chips. In addition, corporate bonds in general got crunched in the second half of 1998.
Contributing Reporter Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at [email protected].
