The cutthroat high-yield market gained yet another player last week with the entry of a new Montgomery Securities unit.

The equities giant has had a high-yield finance group at its San Francisco base since 1993, and has managed over $5 billion of debt transactions in that time. Among them: a $125 million issue for Genesis Health Ventures, a $350 million issue for Host Marriott Corp., and a $200 million issue for Prime Hospitality.

But according to Montgomery, most of that work has been as co-manager on high-yield deals, underwriting bonds originated by another firm. On May 12, the firm opened its New York high-yield operation to do trading, sales, research, and bridge lending. The origination effort will be run from Montgomery's San Francisco offices.

The new group is focused on attracting business from Montgomery's existing customer base in equities. The firm expects to leverage strengths such as its top-10 ranking among managers of initial public offerings into high-yield finance business.

High-yield investors expressed confidence in the new group's abilities and were already trading with it on the first day of operations.

"I've been working with some of these people for years," said Jerry Paul, who manages a high-yield portfolio at Invesco. "Now they're just working with a different shingle over the door."

Still, some rivals questioned Montgomery's ability to win business beyond its existing customer base, one even going so far as to claim the firm itself is "merger bait."

Lending some credence to that view, a report Monday in Barron's stated that Montgomery is seeking an outside investor to take a 10% stake in the firm to provide capital. It reported speculation that NationsBank Corp. and First Union Corp. were candidates.

The group now has about 30 staffers, and is looking to hire a few more, said Lisa Yeager, a managing director and head of high-yield investment banking in San Francisco.

In New York, the new sales operation is headed by Ashley Cooper, managing director and head of high-yield sales, and includes former Credit Suisse First Boston salesman John Crotty as well as salesman Steve Chronhert from NationsBanc Capital Markets Inc.

Analysts include Rosemary Sisson-a principal-a retail and consumer analyst formerly of CIBC Wood Gundy Securities.

Also on board is Richard Furst, a gaming and lodging analyst. Both report to Ned Zachar, media and telecommunications analyst and head of the research group.

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