Word: junks
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...Wall Street the debt-propelled takeover binge gave rise to the era's get- rich-quick mentality. Michael Milken, the deposed Drexel guru who pioneered junk bonds and nurtured them into a $200 billion market, was paid $550 million in 1987 for his unrivaled expertise. In a perverse version of the trickle-down theory, lower-echelon bankers raked in multimillion-dollar salaries, and new recruits with two years' experience earned six-figure sums. The fantastic payoff created a brain drain as the best and the brightest from top colleges and business schools across the U.S. flocked to Wall Street...
Drexel's demise was greeted with little sympathy, even on Wall Street. Many experts regard the firm's fall, caused largely by the collapse of its $1 billion junk-bond portfolio, as a just comeuppance and a sign that Wall Street is entering a period of welcome sobriety. Drexel, after all, was more than just a tough competitor; it was viewed as a bad influence. Last year the company agreed to pay a $650 million fine and pleaded guilty to six counts of mail and securities fraud. As part of the settlement, federal prosecutors required Drexel to dump Milken...
...legacy, Drexel leaves behind a battered junk-bond market and hundreds of corporations staggering under debt. Last week the prices of junk bonds, some of which had lost as much as half their face value in recent months, rebounded as investment firms bought them up to reassure the marketplace about their stability. But in the long run, the overleveraging of America could spell trouble if the country plunges into a recession and profits tumble, leaving companies unable to meet their interest payments...
...Junk bonds were a little-known security when Milken opened Drexel's Beverly Hills office in 1978. Seated at an X-shaped trading desk, Milken first peddled junk for small and medium-size companies whose weak credit ratings kept them from issuing bonds that paid lower interest rates. When investors snapped up the junk, Milken expanded the market for his new securities. The tireless promoter argued that the risk of a junk-bond default was scarcely greater than the risk for blue-chip corporate bonds. Since junk securities paid interest rates about six percentage points higher than conventional bonds, Milken...
...1980s junk had become so popular -- and Milken so powerful -- that corporate raiders could launch a bid backed by little more than one of Milken's trademark letters stating that he was "highly confident" of lining up the necessary financing. Just for the ominous letters, Milken charged fees as high as $3.5 million. Backed by Milken, Texas oilman T. Boone Pickens attacked Gulf Oil in 1984, forcing the energy giant to merge with Chevron and earning nearly $400 million from his seven-month raid. Later Milken bankrolled Carl Icahn in a $1.2 billion takeover of TWA. Supported by Drexel...