Corporate Bond Underwriters Grow More DiverseBy and
Bond deals including minority firms at 19% versus 6% in 2012
Minority-owned banks benefit even as Wall Street lags behind
Investment banks owned by women, people of color and veterans are underwriting a record number of corporate bond offerings, reflecting a push by issuers to boost diversity among the financial firms that help them sell debt.
About 19 percent of U.S. corporate bond offerings this year were sold at least in part by minority-owned firms, up from less than 6 percent of deals in 2012, according to data compiled by Bloomberg. Companies in the financial services and technology industries have been among the most active in selling bonds through banks owned by women, minorities and veterans.
The greater diversity among underwriters comes at a time when the largest Wall Street firms are struggling to include minorities in their own ranks.
While allocations for minority-owned firms are relatively small now, over time, these deals could lead to bigger roles in corporate bond sales, according to Sidney Dillard, head of the corporate investment banking division at minority-owned Loop Capital Markets.
“There’s participation and then there’s meaningful participation,” Dillard said. “They’re two different things. I think that there’s still an opportunity for meaningful participation, but you’ve got to get to participation before you get to meaningful participation.”
When Microsoft Corp. issued $4 billion of 10-year notes at the beginning of the year, lead underwriters Barclays Plc and HSBC Holdings Plc each sold $960 million of bonds. Firms owned by minorities, women and veterans, including Blaylock Van and Drexel Hamilton, were left with $10 million each.
Many of the diversity firms can’t take on any more because of their size, a Microsoft spokesman said. For the past decade, the software company has partnered with minority-owned banks in every bond and commercial paper sale, he said.
The emergence of minority underwriters has its roots in the 1980s- and 90s-era municipal bond boom, when many cities and states began requiring a portion of their bond offerings to be sold by minority-owned banks. Those rules encouraged under-represented groups to found their own firms, spurring the creation of brokerages including Williams Capital and Loop Capital, and giving new life to investment banks such as Samuel A. Ramirez & Co., which was founded in 1971.
Williams Capital leads its peers in underwriting corporate bond deals. The firm, founded by Christopher Williams in 1994, has always focused on that area, unlike many of the other black-owned firms that primarily dealt in the municipal-bond market.
“We continue to work with various corporations to identify ways we can add value to them, and, as a result, earn a spot on their teams," Williams said.
Goldman Sachs Group Inc. typically includes two to four minority-owned firms among the underwriters when it sells its own debt, said Jonny Fine, who runs the investment-grade syndicate group for the Americas. When the company issued $5 billion of notes in January, it enlisted Loop and Telsey Advisory Group, founded by Chief Executive Officer Dana Telsey.
"This is a natural and very public offshoot of how a number of companies are looking to increase their diversity initiatives," Fine said.
Advocates like Reverend Jesse Jackson and his Rainbow Push Coalition have been keeping a ranking of corporations that employ the “most progressive, inclusive practices” in the marketplace. The continued growth in minority-owned firms can play a key role in helping to level the playing field on Wall Street, where women and people of color have historically been at a disadvantage, said Ronald Hill, a professor at George Washington University School of Business who has studied corporate social responsibility.
“As you open the door wider, you’re going to get a wider swath of individuals entering that door,” Hill said. “Those that can, will succeed.”
— With assistance by Dean Psomaras, James F D'Elia, Kenneth Pringle, and Rick Green