PaineWebber Group Inc. will take two weeks to determine the fate of employees in Kidder, Peabody & Co.'s municipal bond department, Kidder sources said Wednesday.

Top officials in PaineWebber's municipal securities group, led by managing director Terry L. Atkinson, met with Kidder's entire municipal department yesterday morning.

Atkinson, accompanied by managing director Walter T. Kicinski and first vice president Joan Marron, told Kidder's municipal department that he and his staff will probably determine most of the people who will be absorbed into PaineWebber's municipal group before the end of the month, Kidder officials attending the meeting said.

Following the address, PaineWebber officials conducted a series of face-to-face meetings regarding future employment with Kidder municipal bond employees. Most Kidder employees and Wall Street observers expect widespread layoffs as a result of PaineWebber's agreement Monday to acquire Kidder from General Electric Co.

During the department-wide gathering, Atkinson attempted to downplay reports in The Bond Buyer that PaineWebber's purchase of Kidder would leave most of Kidder's municipal workforce out of a job, sources who attended the meeting said.

Atkinson said PaineWebber would keep "as many people as possible," one Kidder employee said.

Said another Kidder employee: "[Atkinson] said that he looks at this as a merger, not an acquisition."

Atkinson did not return telephone calls, and other top PaineWebber officials declined to comment.

Other Kidder employees, though, did not take much comfort in Atkinson's address, saying he did not provide many specifics on their job prospects. With the exception of several top performers, PaineWebber will probably release most Kidder employees where duplication exists, sources with knowledge of the matter say.

Despite the slowdown in municipal activity, Kidder's top sales people, investment bankers, and traders will have "many opportunities" at other firms, because they are revenue generators, according to Perrin Long, an independent analyst who follows the securities industry.

In fact, several Kidder employees said they have been contacted by numerous headhunters as well as other municipal bond firms for possible employment.

"The key, near term, is what kind of deals PaineWebber can strike with the important people from Kidder Peabody to entice them to remain in the new organization," Long said. "The general thinking is that you're going to have to give PaineWebber some time to see how well they'll manage a larger organization."

Based on their performance in the first nine months of the year, a combination of Kidder Peabody and PaineWebber would result in the nation's fourth-largest underwriter of municipal bonds.

Through September, PaineWebber ranked sixth in underwriting long-term, tax-exempt bonds, according to Securities Data Co. The firm brought $7.3 billion of bonds to market during this time, for a 5.8% market share.

Kidder ranked 11th, with a 1.7% market share, acting as lead manager on $2.2 billion of long-term offerings.

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