LOS ANGELES -- Chilton & O'Connor, a Los Angeles-based broker-dealer, has recently been expanding its public finance department, believing that a turnaround in the besieged California economy is approaching.
The firm also has set its sight on becoming a regional investment banking firm. During the past decade, the firm has focused on real estate-related tax allocation and Mello-Roos issues.
Concerning its expansion efforts, the firm is "gambling a little bit that there will be a stimulus in the economy" that will lead to increased business, said William J. O'Connor, president and chief executive officer of Chilton & O'Connor.
During the past two years, the firm's public finance department added eight investment bankers and associates, O'Connor said.
The firm now has 23 employees. A total of 13 employees are "investment bankers and associates working full time in public finance," O'Connor said. Ten others work on the trading desk or in "back-up staff" positions, he said.
By contrast, "two years ago we had five full-time investment bankers," O'Connor said. Now, the firm is "a boutique about to become a full-fledged regional firm," he said.
As part of its expansion strategy, "we are now going after business from prominent counties" and seeking other "high-profile" clients, O'Connor said.
For example, Chilton & O'Connor hopes to become a co-manager in California's underwriting pools for negotiated bond sales.
The state treasurer's office is seeking requests for qualifications from firms vying to be co-managers or bookrunning managers of the state negotiated pools. The treasurer's choices will be announced in January.
Last year, Chilton & O'Connor joined the state's selling group for negotiated issues. But the firm wants to be elevated from the selling group level to the level of co-manager, which stands to make a higher profit than the selling group.
"We have the ability and capital to take risk," O'Connor said.
Chilton & O'Connor has added various employees in recent monts.
Kevin T. Burke, senior vice president, joined the firm in August. Burke formerly was Midwest regional manager and director for Prudential Securities' public finance department.
Franklin C. Sims joined the firm in October as a senior vice president. Sims has more than 20 years of experience in corporate finance, commercial banking, and real estate. His emphasis is on Mello-Roos financings.
Mark A. Marsing joined the firm in January as a vice president. Marsing is an attorney whose former private practice emphasized real property, finance, and environmental law.
Lee C. McClurkin, vice president, joined the firm in November. He formerly was assistant vice president at Rodman & Renshaw Inc.
The public finance staff "buildup is in anticipation of a slow real estate rebound over the next couple of years," O'Connor said, adding that major developers recently told him "we are at the bottom of the recession."
Some developers believe "we bottomed out in the last quarter," he said.
Launched in May 1983, Chilton & O'Connor operates in California from offices in Century City.
The firm ranked 29th among managing underwriters handling California long-term municipal new issues for the first nine months of 1993, according to Securities Data Co.
During the first three quarters, the firm was lead manager of nine new issues with a volume of $115.8 million, for a 0.4% market share, Securities Data reported.
For the first 11 months of 1993, O'Connor said Chilton & O'Connor was the lead manager of $173.3 million in new money issues.
Underscoring its traditional real estate emphasis, Chilton & O'Connor ranked 10th in a listing of lead managers of California tax allocation/tax increment finance bonds during the first three quarters of this year, according to Securities Data. The firm was lead manager of one tax allocation issue with a principal amount of $71.7 million, for a market share of 3.9%.
O'Connor said he expected to be a lead manager of four tax allocation issues "totaling approximately $120 million" bu yearend.
Chilton & O'Connor was among a 21-member selling group in the negotiated sale last Wednesday of $692.1 million in San Jose Redevelopment Agency tax allocation bonds. The true interest cost was 5.585%.
Chilton & O'Connor placed sixth among all municipal underwriters of California Mello-Roos issues in a ranking of lead managers during the first nine months of this year, Securities Data said. The firm was lead manager of one Mello-Roos issue whose principal amount was $7 million, for a market share of 4.5%.
However, since the Securities Data information was compiled, O'Connor said his firm completed two more Mello-Roos issues valued together at $23 million. In addition, the firm is overseeing two other Mello-Roos refundings totaling $98 million, "and we anticipate another Mello-Roos issue valued at $100 million before yearend," O'Connor said.
