* CEO says undisclosed minority stake is "significant"
* Restructuring rebound seen as crisis-era loans come due
* Kruszewski warns economy more sluggish than was expected
* Stifel's business "has been impacted" so far in 2nd-qtr
(Adds more CEO comment, background on Stifel performance and
the broader economy)
By Joseph A. Giannone
NEW YORK, June 9 The head of Stifel Financial
Corp (SF.N) said on Thursday that the U.S. brokerage's $40
million investment in restructuring advisor Miller Buckfire &
Co will likely lead to a complete takeover down the road.
Stifel's investment, which will pay off when bankruptcy and
restructuring activity rises, also comes as Stifel Chief
Executive Ronald Kruszewski warns the current economic
environment is making things tough on brokerage and banking.
Shortly before midnight on Wednesday, St. Louis-based
Stifel announced it was buying $40 million of senior preferred
securities from Miller Buckfire, a nine-year old firm that has
advised on such major restructuring deals as Dana, Calpine and
Kruszewski, expanding on Wednesday's deal announcement,
said Stifel will have an undisclosed minority stake, but one
that he emphasized was significant.
"We've structured this as a strategic investment, which
allows us to sort of date before we get married. I can see
eventually folding them completely into our organization,"
Kruszewski said at a Sandler O'Neill & Partners conference.
Stifel may not be a household name but the firm has grown
rapidly for the past 15 years through timely acquisitions and
by hiring when other Wall Street firms are shedding. It is one
the best performing financial services stocks of the past
decade and one of largest remaining independent brokers.
This time, he said, more companies will be forced to raise
capital or convert their creditors' debt into equity.
Stifel, which has nearly 2,000 retail financial advisers
and a growing middle-market investment bank, will offer Miller
Buckfire restructuring advice to its clients. Miller Buckfire
will likewise offer Stifel capital markets services to clients.
Miller Buckfire is not expected to boost revenue in the
short term, he said, but it will in a few years. A wave of debt
refinanced during the 2007 and 2008 financial crisis, helping
struggling firms defer their problems, will come due soon.
Indeed, Kruszewski paused during his presentation to
express his concerns about the state of the U.S. economy and
the capital markets.
"That robust recovery many of us anticipated in December
2010 has yet to arrive," he said. "Where we had thought GDP
would be growing 4 to 5 percent, it's under 2."
Instead of economic acceleration in the second half this
year, he said, "what we see is a deceleration across almost all
Stifel's own business "has been impacted by anemic industry
volumes," he said, as well as muted market swings, an unsteady
equity-underwriting market and "softness" in retail brokerage.
Kruszewski told reporters afterward that the tsunami in
Japan earlier this year has had a big impact on the U.S.
economy, shaving about one percentage point from GDP growth in
the United States.
The recruiting environment for brokers also has become more
difficult this year, he said, as the biggest firms dangle
ever-higher pay packages to brokers not locked down by 2008 and
"We're standing down," he said, saying some of the priciest
broker packages have become "uneconomical."
That said, Kruszewski said he intends to greatly expand
Stifel's use of debt relative to capital -- in larger part to
fuel the expansion of its small commercial bank unit.
"A three-to-one leverage ratio is too low. We will get our
leverage higher," he said, to as much as six-to-one.
(Reporting by Joseph A. Giannone, editing by Bernard Orr)