AT&T prices $450 million bond offering.

Blaylock & Partners, Utendahl and Williams Capital among co-managers in historic deal

An interesting future awaits minority investment bankers with corporate-bond clout as a three-year, $450 million AT&T bond issue, which closed late last year, is touted as one of the largest all-minority, woman-managed financing deals.

Instrumental in the deal was AT&T Chairman and CEO Michael Armstrong, who made a capital markets commitment at last year's Wall Street Project conference. Five African American-owned firms, one Latino and one woman-owned firm participated. Joint lead managers were Blaylock & Partners L.P. and Utendahl Capital Partners L.P. The Williams Capital Group served as senior co-manager, while Loop Capital Markets L.L.C., Ormes Capital Markets Inc., Ramirez & Co. Inc. and Muriel Siebert & Co. Inc. served as co-managers.

While many firms specialize in municipal bonds, equities or securities, AT&T sought broad expertise and distribution capability for its corporate bonds. Each firm's capital base was also weighed in the choice.

Blaylock & Partners had previously proven its prowess as a co-manager in AT&T's gigantic $8 billion global transaction last March. Larger, older Wall Street co-managers did no better than this solitary minority firm in bringing in new investor demand. Serving primarily middle-tier institutional investors with $1 billion to $5 billion under management, Blaylock on its own can underwrite up to a $1 billion offering in investment-grade debt. For Utendahl Capital Partners, corporate debt makes up $120 billion out of its total $420 billion in underwriting transactions since 1992. Its five-year relationship with AT&T includes research, corporate finance and a financial advisory role on merger and acquisition deals.

Traditional Wall Street firms tend to embrace the same institutional investors--large and midsize institutions. Corporations generally desire new "names" to buy and hold their bonds. A broader base of institutional investors means better securities pricing, lower borrowing costs, a better bottom line and higher earnings per share.

"In the all-minority-and-woman transaction that we just did, we saw a lot of smaller institutions that had participated, names that weren't familiar to us," says Edward M. Dwyer, AT&T's vice president and treasurer. "Whenever an investment bank can identify for you a new corner of demand, that can translate into basis-point savings for the issuer."

Previously untapped buyers accounted for nearly 30% of both names and total orders. Thirteen percent of the accounts and almost 20% of the orders went to minority-owned investment managers.

The transaction was a huge success. AT&T originally expected $300 million, but the seven firms built a collective demand of $680 million. AT&T subsequently raised the bond offering to $450 million.

Second- and third-tier institutional investors manage less than $5 billion. Blaylock dug up demand by focusing on these institutions, often overlooked as targets of new bond issues. Possessing its own billion-dollar asset-management firm, Utendahl even belongs to the base of small institutional investors AT&T wished to reach. Williams found the offering presented a venue for nonminority money managers whose clients require a percentage of their account's business be done with minority-owned firms.

So where does this AT&T experience stand in the investment bankers' growth trajectory?

"Any time we are co-manager, it does help our firm grow," says Christopher Williams, president of the Williams Capital Group. "The more bonds of a variety of issuers that you are able to provide to your investors, the more attractive, the more valuable we are as a brokerage relationship."

"It's another milestone in showing our ability to act as a lead manager and play a significant role to corporate America," says Ronald E. Blaylock of Blaylock & Partners.

AT&T was one of last year's most talked about enterprises, and its vote of confidence may be a cue for other companies.

"It helps set the tone and, hopefully, establishes another shift in the paradigm out there for minority firms to convincingly be in book-running roles on deals going forward," says John O. Utendahl, chairman and CEO of Utendahl Capital Partners.

Utendahl's AT&T follow-up foretells a bright future in the business. In September the firm broke new ground as sole lead manager in a 10-year $300 million investment-grade bond issue by Coca-Cola Enterprises Inc.