Word: milken
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...battle to control RJR Nabisco has pitted some of Wall Street's most powerful investment houses against one another, but the financial muscle behind the bidding is really the legacy of one man: Michael Milken. It is not just that Milken's firm, Drexel Burnham Lambert, is bankrolling the Kohlberg Kravis Roberts bid to the tune of $5 billion. Milken's role is much grander and far more controversial. The boyish moneyman with the tousled toupee and the obsessive work habits has almost single-handedly sparked the frenzy of takeovers and buyouts that has given the Roaring Eighties their name...
...Milken who created and has dominated the market for junk bonds, the high-octane financial fuel that powers many of today's most daring Wall Street deals. The volume of these bonds has zoomed from less than $1 billion in 1981 to more than $175 billion today. In the process, Milken, 42, has amassed a fortune of at least $500 million and a reputation as the most influential financier since J.P. Morgan...
...Nabisco showdown may prove to be one of Milken's final moments of glory. He and Drexel are expected to be slapped any day now with criminal indictments accusing them of racketeering, mail fraud and other crimes. The charges would stem from two years of federal investigations that prompted the Securities and Exchange Commission to file a civil suit against Milken and Drexel in September, accusing them of 18 transactions including stock manipulation and other securities-law violations. Says a close associate of the embattled dealmaker: "Two years ago, Milken was on top of the world. Now it has crashed...
...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...
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...