Drexel Burnham Lambert
Strategic Concepts & Mechanics
Primary Evidence
"The banks were lenders in many of Drexel’s deals, but their loans were generally short-term and secured. Without Drexel to place the unsecured, subordinated debt, these deals would never have happened. And while other investment banking firms now were eager to play Drexel’s part, the megadeals spawned securities—junk bonds—in amounts that no investment-banking firm but Drexel could sell."
"Under the terms of his LBO loans, Kluge was required to break up Metromedia and sell off the pieces to liquidate the debt in short order. It quickly became apparent, however, that it would not be feasible to peddle the assets quickly at premium prices. The problem was partly that poten¬ tial acquirers were constrained by Federal Communications Commission (FCC) limits on the number of stations they could own. Faced with pos¬ sible default on his loans, Kluge turned to the investment bank Drexel Burnham Lambert for a new financing package that granted him addi¬ tional time to complete the asset sales."
"The goal would be to convert 100 of these to minimarts and give a general facelift to all retail locations. The team wasted no time in getting into action. Then, in July, Peter Munk negotiated refinancing of Clark Oil, by raising $300 million selling first-mortgage notes through Drexel Burnham Lambert, a major New York financial house."
"The rest of the year was spent consolidating the new Power Fi¬ nancial and getting its North American subsidiaries to work together, selling each others’ services where legally permitted. Another task was setting up the infrastructure for co-operation of Power Financial’s North American units, where it was practical and legally permitted, with Pargesa and its global financial-services subsidiaries, including Groupe Bruxelles Lambert and its New York investment house sub¬ sidiary, Drexel Burnham Lambert."
"When we were at our limit with our usual suspects of lending, we turned to still more alternative means of financing. One of those was a controversial financier named Michael Milken, who was known for creating a new market for high-yield “junk” bonds. The rise of Milken and the firm Drexel Burnham Lambert created a revolution in deal financing for us. Their agility to buy and price offerings dramatically changed the acquisition game—and saved me incalculable hours in front of clients on road shows. We knew what level of debt and the terms that were available if we had Drexel on our team."
"McCaw's goal, as always, was to preserve his independence, flexi- bility, and control. Although he had qualified for the MCI deal on the basis of Affiliated's balance sheet, McCaw ultimately decided to go with a different form of financing, perhaps to show a measure of indepen- dence from his Boston associates. He went with junk bonds, a relatively new form of corporate IOUs at high interest rates, recently popularized by an already legendary trader at Drexel Burnham Lambert named Michael Milken."