The head of BankAmerica Corp.'s high-yield trading operation has left, just weeks after the bank stubbed its toe on its first mandate to lead a junk bond deal.
John Hakala, a senior managing director and head of high-yield sales and trading, left the bank last Monday, a spokeswoman confirmed. Mr. Hakala's deputy, vice president Jerry Bias, also left, and he has joined Bear, Stearns & Co. as an associate director and high-yield trader.
The departures come a month after the San Francisco banking company's underwriting unit, BancAmerica Securities, postponed a $150 million offering for Station Casinos Inc., Las Vegas, due to market conditions. The deal was BancAmerica's debut as lead manager of a junk bond issue.
High-yield bankers and traders said Mr. Hakala's departure is directly linked to the Station Casinos deal. BancAmerica fully underwrote the issue, which means it took complete responsibility for remarketing it to investors. While "buying" deals is a common strategy, it is risky because the underwriter must hold any paper it cannot sell.
Zed Francis, a BancAmerica executive vice president in charge of high- yield, said the delay in the Station Casinos issue and the departures of Mr. Hakala and Mr. Bias are unrelated.
"John left the company because of differences in philosophies we had," Mr. Francis said. "Jerry left to go to Bear Stearns."
Jim Baldoni, a member of BancAmerica's high-grade trading team, is heading the junk trading operation on an interim basis, Mr. Francis said. "We are looking to recruit new traders into the high-yield business and expect to make an announcement soon," he added.
Buying deals is a common practice among underwriters in a bull market, bankers said. Some investment bankers said commercial banks, which are relative newcomers to the junk bond business, are using the strategy to "muscle" their way into the market.
Indeed, BancAmerica's willingness to buy the deal helped it wrest the Station Casinos mandate away from Salomon Brothers Inc., which had led Station's earlier junk issues, said Glenn Christianson, chief financial officer of Station.
"Salomon Brothers is an excellent firm, and we'll continue to have a close relationship with them," Mr. Christianson said. "But at the end of the day, BancAmerica was willing to purchase the entire deal, so we decided to go with them."
The company is in the midst of developing projects in Las Vegas and St. Charles and Kansas City, Mo., he explained. "We didn't have a few weeks to take out to do the road show, so BancAmerica's offer was a better deal for us," Mr. Christianson said.
Unlike bought deals, conventional issues are not priced until they have been out in the marketplace and investors have been lined up to buy them.
BancAmerica announced the Station Casinos issue March 26. The next day, the stock market fell 140 points and a further 157 points the day after that-its worst two-day decline during the recent bull run.
BancAmerica then decided to postpone the offering until early May.
"It was just bad market timing, and they were aggressive at the wrong time," said an investment banker familiar with the deal.
Friday, Mr. Francis reiterated BancAmerica's plan to reoffer Station Casinos' bonds soon.
"We will look to reoffer our bonds in the next week or so, if market conditions are favorable," he said. The banking company also hopes to have its junk trading desk restaffed by then "so people are comfortable with us."
Mr. Francis said that Mr. Hakala had joined BancAmerica a year ago from J.P. Morgan & Co. In an interview shortly after the decision to postpone the Station Casinos deal, Mr. Hakala said he had high hopes for the bank's nascent junk bond business.
BancAmerica "is in the business for good," he said. "We are the largest commercial banking lender to the casino industry, and there's no reason to think that, in a brief period of time, we won't be the largest high-yield, new-issue underwriter in the casino industry."
Observers said neither his departure, nor the Station Casinos deal, would alter that plan.
"The minor hiccups you get when events like this happen is not going to affect BancAmerica in the long run," an investment banker said. "This business is so integral to any of the banks, and they will continue to build their capabilities there."
