Warburg Beefs Up HY With Penn Hire

Warburg Dillon Read began an attempt to build a top-flight high-yield bond department by hiring one of the Street's most respected high-yield veterans last week, former BT Alex. Brown pro Arthur Penn.

Penn's relocation to the Stamford, Conn. headquarters of Warburg Dillon Read came after a summer spent mulling a variety of job offers, market sources said. Penn left BT Alex. Brown in June following that company's merger with Deutsche Bank, when it became clear that Deutsche had no intentions of retaining most of the BT high yield staff.

Market sources said that Penn's hire as co-head of global leveraged finance, as well as Warburg's intentions to embark on an across-the-board hiring spree in the next year, shows that the shop is mounting a campaign to bolster its standings in the junk market rankings.

As of Sept. 30, Warburg Dillon Read was ranked 14th in the high-yield straight debt tables run by Thomson Financial Securities Data, with $1.251 billion in proceeds and a 1.5% market share. The shop was also ranked 14th at year-end 1998, with $2.1 billion in proceeds, and posted similar numbers in 1997.

Penn hopes to break the cycle. "The firm has an opportunity to really build a world-class leveraged finance effort and build it up to the quality of the rest of the organization," he said.

With the high-yield market in a serious rut, with yearly new issuance expected to be severely down from last year's total and spreads remaining wide, the need for a smaller shop like Warburg to make some noise and win some mandates becomes increasingly important.

"You can't live on a middle-tier approach any more," one high-yield banker said.

Penn's hire was hailed as a coup for Warburg, as Penn is regarded by many pros as a top-caliber official in the high-yield market and was reportedly entertaining several high-profile offers before he signed with Warburg. He ran BT's group for five years, during which time the underwriter hovered around sixth place in league rankings.

Penn said the leveraged finance group's goal will be to bring its performance up to the level of Warburg's well-regarded healthcare and telecommunications groups. "There's a lot of opportunity that has yet to be fully monetized from a leveraged finance standpoint," he said.

The company already has a presence in most of the junk market's key areas, such as transportation, energy and paper, which it hopes will play to its benefit in the leveraged financing of such sectors.

Another aspect of Warburg's new strategy will be an increasing emphasis on the European junk market, which has been one of 1999's few success stories. Co-head of leveraged finance Brian Keelan has moved from the U.S. to London, where he will run the European side of Warburg's business.

Keelan is a 10-year veteran of Warburg, first having served with Swiss Bank Corp. before its 1995 merger with Warburg.

Both Penn and Keelan will report jointly to John Costas, global head of Warburg's fixed income business, and Rory Tapner, global co-head of corporate finance.