Pierpont Securities Holdings LLC and Cortview Capital Holdings Inc., two bond traders created to fill a void after the global financial crisis, agreed to merge.
Stone Point Capital LLC and General Atlantic LLC, the private-equity firms that started Pierpont with $200 million in 2009, will remain investors in the combined company, the brokerages said in a statement today. Warburg Pincus LLC, which created Cortview with a $125 million commitment in 2010, isn’t named as an ongoing shareholder. Financial terms weren’t disclosed.
The dealers were among dozens that started after the collapse of Lehman Brothers Holdings Inc. in 2008, betting that market turmoil and consolidation among the biggest brokerages created an opportunity. Some firms that introduced such operations, including BTIG LLC, Chapdelaine & Co., and LaBranche & Co., were forced to shrink or shut them as the bigger competitors recovered and trading volume leveled off.
Pierpont Chief Executive Officer Mark Werner will run the combined organization, which will be known as Pierpont-Cortview Securities. It will be based in Stamford, Connecticut, and have about 160 people, the companies said. Kelley Millet, Cortview’s CEO, will be co-president along with Pierpont’s Thomas C. Connor.
Millet replaced co-founder Michael Lacovara as Richmond, Virginia-based Cortview’s CEO last year, and two months later Warburg Pincus said it contributed an unspecified amount of additional capital to the firm. The same month, the firm jettisoned a team it had hired earlier in the year to trade mortgage-backed securities.
Cortview was founded to fill a perceived void as regional banks around the country pared their brokerage operations to focus on lending, co-founder Ted Luse said in a September 2010 interview. He said the company expected to expand its balance sheet to as much as $2 billion within a year.
The company’s broker-dealer subsidiary had assets of $405 million as of Dec. 31, according to a filing with the U.S. Securities and Exchange Commission. That included about $36 million of member’s capital, the filing shows.
An average of about $11.4 billion of investment-grade bonds changed hands per day this year, according to Financial Industry Regulatory Authority statistics. That’s up from $8.6 billion in 2008 and about the same as in 2010 and 2011.
Pierpont focuses on trading in Treasuries and agency securities. Its co-founders told Investment Dealers’ Digest in 2010 that they expected the U.S. government debt to rise, while the number of the Federal Reserve Board’s primary dealers in Treasuries had shrunk during the financial crisis. They told IDD that Pierpont planned to apply to become a primary dealer, a designation it hasn’t yet received.
Co-founders Werner, Connor and Joseph Blauvelt worked together at JPMorgan Chase & Co. and later at Bank of America Corp., where Warner was head of global markets before departing in 2007. “Pierpont” is the middle name of the financier who gave his name to JPMorgan.
Pierpont’s broker-dealer unit had $13.1 billion of assets as of Sept. 30, according to an SEC filing, and about $186 million of member’s equity.
Other private-equity firms have placed bets on bond dealers. Aquiline Capital Partners LLC agreed in 2010 to invest $225 million in CRT Capital Group LLC, a Stamford-based bond broker, to fund expansion. Arsenal Capital Partners LP led the group that backed a startup, KGS-Alpha Capital Markets LP, with $100 million.
To contact the editor responsible for this story: Jeffrey McCracken in New York at Jmccracken3@bloomberg.net