Gleacher Sees Revenue Crimped as Credit Unit Loses 20 People

Gleacher & Co., the unprofitable investment bank suffering defections after it decided not to seek a merger, said 20 people left its credit-products division and that revenue will probably fall as it seeks replacements.

“While these departures are likely to have, at least in the short term, an adverse impact on the company’s revenues, the magnitude and duration of this impact cannot be estimated at this time,” the New York-based firm said today in a regulatory filing.

The division provides analysis, sales and trading on high- yield and investment-grade credit securities, among other services, according to the filing. Gleacher will seek to replace departed employees from the unit’s 73 remaining members and through recruiting, it said.

Led by Chief Executive Officer Thomas Hughes, Gleacher has slid 27 percent to 69 cents at 9:35 a.m. after announcing Feb. 15 that it won’t seek to sell itself or merge with another company. A junk-bond sales team including five brokers and two analysts defected as the decision was made public, with members of the group telling colleagues they’re joining Milwaukee-based Robert W. Baird & Co., people with knowledge of the matter said at the time.

ClearPoint Unit

Gleacher, which had been exploring a possible acquisition since last year, had a 2012 loss of $78 million from continuing operations. The firm will sell its ClearPoint mortgage unit to Ocwen Financial Corp. after ruling out a merger or sale of the whole company.

Gleacher bolstered its credit-brokering business in 2008 and 2009 as souring mortgages forced the biggest banks to lower inventories and curb the amount of money they devoted to facilitate debt trading.

Hughes became CEO in May 2011, taking over a firm that had posted losses in four of the previous five years and had expanded by 65 percent to 348 employees in the three years ended 2010.

Hughes joined after spending more than two decades on Wall Street, heading mortgage-backed securities trading at Merrill Lynch & Co. starting in 1997 before going on to Deutsche Asset Management, where he was CEO, according to an April 21 release from Gleacher.

‘Client Relationships’

He brought in John Griff, who worked with him at Merrill Lynch, in 2011 to be chief operating officer. In January 2012, he hired Geoffrey Coley, a former co-head of fixed-income trading at Citigroup Inc., to “expand the firm’s current and prospective client relationships,” Gleacher said in a statement at the time.

“We actually are attempting to grow our business and again, build-off of our strengths,” Hughes said in a Feb. 9, 2012, call with investors. “We continue to recruit aggressively against our investment banking, fixed income and the other important divisions.”

Later that month, Joseph Mannello departed as head of corporate credit and Coley took over the role, according to a statement from the firm at the time. Mannello had joined Gleacher in 2008 along with a high-yield bond team from BNY Capital Markets Inc., Financial Industry Regulatory Authority records show.

Net Losses

Coley was CEO of Chapdelaine Credit Partners until that firm’s credit arm collapsed in January 2011. He then headed fixed income at Citadel LLC’s securities unit before it shuttered its equity-research group and investment bank later that year.

In April, Rob Fine, head of the firm’s mortgage backed securities and rates group, and Robert Tirschwell, who had headed that unit’s trading, departed.

The number of employees has declined 28 percent to 250 people since the end of 2011, according to data compiled by Bloomberg and confirmed by Gleacher last week in a conference call. The company has posted combined net losses of $180.4 million in the three years ended December, the data show.

To contact the reporter on this story: Lisa Abramowicz in New York at labramowicz@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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