Word: drexel
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Dates: during 1980-1989
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Talks then stalled over KKR's insistence that Drexel Burnham Lambert manage the buyout's junk-bond financing. KKR contends that only Drexel has the savvy to sell the record $5 billion in high-yield bonds that is needed. But RJR Nabisco's managers are concerned that the buyout could be jeopardized if Drexel and Michael Milken, its junk-bond wizard, are indicted for securities fraud, which is expected to occur soon...
With good reason. Insider-trading scandals, capped by this month's sweeping fraud charges against the investment firm Drexel Burnham Lambert, have convinced small investors that the Wall Street game is best played by the well-connected. Faced with the market's volatility in the past year, intensified by program trading, these investors fear getting caught up in avalanches beyond their control. At the same time, rising interest rates are attracting them to secure, fixed-income investments, typically bank certificates of deposit and Treasury bonds. The small-timers' absence from the stock market is dampening the averages and reducing business...
...Drexel has reportedly set aside a $650 million war chest to fight the SEC's charges. A big part of the firm's strategy will be to attack the Government's case for being too dependent on Boesky. Says Martin Flumenbaum, who will defend Milken: "It will turn completely on Boesky's credibility, and Boesky has a clear motive to lie and fabricate." For its part, the SEC claims that it has substantiated its case with transaction records and testimony from Drexel employees, most notably Charles Thurnher, a senior vice president in the junk-bond department. Says Gary Lynch...
...Despite Drexel's combative public posture, the company is probably wrestling with a difficult decision: whether to endure a trial or try to negotiate a settlement. Drawn-out civil and criminal trials would be a drain on Drexel's resources and customer goodwill. Moreover, Drexel may have more court battles to fight against its aggrieved clients and the investing public. Late last week a lawyer in Philadelphia filed the first suit on behalf of stockholders in the companies listed in the Government's case. As Drexel's legal troubles proliferate, they are already transforming the firm from an aggressor feared...
...Government files stock-fraud charges against Drexel Burnham. -- Gold among the thrift ruins. -- Turning patter into profits...