Kenny Moelis would never say so, but like others who once worked 14-hour days alongside Michael Milken, he must feel a sense of vindication.
When the Drexel Burnham Lambert investment bank collapsed in disgrace seven years ago, Moelis and many other shellshocked young employees went job-hunting for the second time in their lives. The market for junk bonds became as dry as the Los Angeles River. Newspapers like this one ran headlines such as "Junk Bonds--the Financial Revolution that Failed." Unemployed Drexelites who once revered Milken shouldered the stigma of his guilty plea to six felonies, including securities fraud.
These were the foot soldiers of Drexel Burnham--the ones whose names did not appear in the hundreds of articles devoted to the firm or Milken, who pioneered the use of junk bonds to finance corporate takeovers.
Some spoke to Milken only once, during a hiring interview. Most cannot be found in the indexes of such Drexel tell-all books as "The Predators' Ball" or "Highly Confident."
Now, almost a decade later, dozens of smart, highly skilled Drexel alums like Moelis are riding high in Southern California, using techniques perfected at Drexel to help raise money for growing companies and fuel a global wave of corporate consolidations.
It's not quite the roaring 1980s, but junk bonds--call them high-yield securities, please--are again on investors' most wanted list. Fewer defaults have helped boost prices for the non-investment grade bonds, which offer investors higher returns to make up for the increased risk.
Also back are a friendlier, more civilized version of hostile takeovers. A mini-boom in leveraged buyouts may be just around the corner.
"People said the market was dead, but I don't think any of us felt that way. We just wondered how long it would take to come back," said Moelis, 38, now easily the most powerful investment banker in Los Angeles, with such clients as Donald Trump and corporate raider Carl Icahn. Moelis is advising Hilton Hotels Corp. on its $6.5-billion hostile takeover of ITT.
Milken's proteges, many of whom were only in their mid-20s or early 30s when they worked with him in Drexel's Beverly Hills office, are now seasoned financiers.
In part they have become successful riding the new wave of interest in junk bonds. But timing was not the only thing on their side. Drexel had a knack for hiring the best and the brightest. Once at Drexel, employees got experience on major deals at a young age.
