Keefe Bruyette: Up from Ground Zero

After losing a third of its staff and all of its New York documents and files, the firm has made an amazing recovery

Hanging in the New York offices of Keefe, Bruyette & Woods Inc. is a painting of the American flag. A close look reveals that the stripes are in fact names. These are the 67 people who worked at KBW's offices on the 88th and 89th floors of the World Trade Center and died on September 11. The flag is the only obvious reference to the tragedy, and, indeed, to all appearances, KBW-which makes its money by researching, trading, and advising banks and financial-services firms-is prospering. It's a bittersweet success. "No matter what horrible things you've been through, life goes on," says President Andrew M. Senchak. "It's horrifying and glorious at the same time."

Going on meant rebuilding the shattered firm, which was among the hardest hit. Since that day, as they have grieved for their lost colleagues, Senchak, CEO John G. Duffy, and their staff have done more. Today, the reconstituted KBW employs more people, takes in just as much in commissions, and covers almost as many stocks as it did when the Twin Towers fell. Revenues are down 13% from a year ago, but that's an impressive achievement given the economic climate. The firm's resurrection is a result of Herculean efforts by surviving employees, plus dozens of outsiders, some of whom radically changed their lives to join. And, Duffy says, KBW caught "some breaks along the way."

The first two weeks were the toughest. The company had lost its co-chairman, a third of its staff, and all of its New York documents and computer files. Senchak, then KBW's vice-chairman and the man who ran the company while Duffy was home mourning the death of his son, Christopher, an employee, recalls those early days as "fundamental chaos. There was no road map for what we had to do." Still, order soon emerged. KBW set up temporary digs at the offices of Wachtell, Lipton, Rosen & Katz, a midtown law firm where Senchak had been on the morning of September 11. KBW also shipped traders up to its Boston offices until securing temporary space at the Banc National de Paris.

A huge hurdle was filling the vacancies-a task made immeasurably simpler when Wall Street veterans, ex-Keefe employees, and even rivals began offering their services. One such person was Michael Corasaniti, an ex-portfolio manager for Newberger Berman LLC who had quit the rat race to teach part-time at Columbia University, work at boutique research shop Graham Fisher Co., and spend more time with his young son.As he scanned the list of missing employees on KBW's Web site, Corasaniti realized the firm needed his help. "It was like a phone call from God,"he says.

Corasaniti's decision to accept a job as director of research marked a turning point. His presence prompted former colleagues to come aboard, too. First to sign up were two of Corasaniti's partners from Graham Fisher. "That was huge," says Duffy. "It sent the message that Keefe was in good enough shape to join." KBW's reputation for solid research helped, too. Before long, most of Morgan Stanley's San Francisco bank-analyst team had joined. Then, two UBS Warburg analysts came on. "It was like a waterfall," says Corasaniti.

As KBW set about rebuilding its business, employees had to be creative. At Wachtell Lipton, where the investment bankers set up shop, there weren't enough phones to go around. So they used public ones to contact clients. "You'd see this Harvard MBA go into a booth, open his briefcase, and put the finishing touches on a deal," says Senchak. "Then he'd leave, and another banker would go into the same booth."

Whatever it took to keep deals flowing, they did. By December, KBWhad closed 13, including co-managing a $930 million trust-preferred securities offering, the largest ever, with First Tennessee National Corp. The complicated deal meant coordinating 85 small banks and creating and selling three types of bonds. "Everyone at Keefe worked around the clock," says Gary Grear, president of FTN Financial Securities Corp., FTN's investment bank. "They were going to get that deal done."

There has been no letup this year. Corasaniti has taken up the goals laid out by his late predecessor, David S. Berry. "David projected 10% growth for 2002. I want his budget met,"he says. That has put a strain on the new researchers. "No one has gotten a vacation since they got here,"says Corasaniti. "Maybe in late September they can have a little time off."

While KBW seems back on track, its execs concede their work is far from finished. In early September, construction at the new headquarters on Seventh Avenue and 51st Street still wasn't complete. Wires hung from the ceiling. Doors were barricaded with wet-cement signs. Duffy's office was a cramped, unadorned space filled with boxes.

There is a nagging worry they all share: What if operating in crisis mode was the easy part? "When things get back to normal, will we have an emotional letdown?" Duffy asks. "The rebuild has been cathartic. We felt we were doing something constructive. "But even if his fears come true, clearly Duffy & Co. will cope.

By Heather Timmons in New York

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