PaineWebber Inc. on Friday said it plans on keeping about half of Kidder Peabody's municipal bond employees, a move that would substantially increase the size of PaineWebber's municipal operations while other firms are cutting back.

In an interview with The Bond Buyer, Terry L. Atkinson, managing director of PaineWebber's municipal securities group, said the firm is making offers to a substantial numbers of employees in Kidder's public finance and sales and trading departments.

Atkinson said PaineWebber would like to retain about 50% of Kidder's muni department, but that not all of these executives have accepted offers and many may turn him down. Atkinson said the firm would like to add about 50 Kidder employees to its payroll.

On Friday, PaineWebber also announced that it has added Kidder's Philadelphia office to its municipal operations. Rumors that the firm would keep the Philadelphia group emerged shortly after the Oct. 16 announcement that PaineWebber had agreed to purchase Kidder.

As part of the move, PaineWebber named George J. Longo and Ralph Saggiomo as co-managers of its Philadelphia office and retained five additional Kidder employees.

PaineWebber today is expected to announce the addition of several more Kidder employees to its municipal roster. Sources with knowledge of the issue say PaineWebber has offered jobs to Marvin Marcus, who headed Kidder's public finance group, as well as to investment bankers David Weprin and Paul Ladd.

It is unclear if these executives have accepted the offers, and Atkinson would not comment.

The staff additions belie the municipal market's sour disposition and expectations that tough times will continue for the foreseeable future.

A dramatic rise in interest rates and a reduction in new issuance has made 1994 one of the worst years in memory, forcing many firms to cut staff and map out future reductions.

But Atkinson said PaineWebber's plan is to add staff, build revenue, and emerge as one of the top firms in the business next year. PaineWebber ranked eighth out of the nation's top 100 underwriters in 1993. Atkinson said the staff additions could place the firm among the top four underwriters in the business.

"The way this will work is we're going to have to increase our market share and expand into areas we haven't been active in," Atkinson said. "If we can do this, it will work. If we can't, it will be a challenge. But I wouldn't be hiring all these people unless I was confident we had an opportunity to drive the revenue line."

Atkinson said PaineWebber has a long-term commitment to keeping most, if not all, the newcomers, but many Kidder employees are not so sure.

Many Kidder staff members say they believe PaineWebber will start making staff reductions in about a year, after management determines that market sectors will remain profitable.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.