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Municipal debt made up about half of the auction -rate market at the end of
http://www.bloomberg.corn/apps/news?pid=20601087&sid=atlChD.avELQ&refer=home 6/18/2008
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UBS Closing Muni Bond Business, Firing 280 People (Update3)
By Adam L. CataIdo
June 5 (Bloomberg) -- UBS is closing its
municipal bond business after failing to
find a buyer for what was the third- largest
underwriter of U.S. state and local
government debt last year.
UBS will fire about 280 people, said Doug
Morris, a spokesman. Zurich -based UBS,
Switzerland's largest bank, said in May it
would shutter its municipal bond division if
it couldn't find a buyer.
"UBS explored a number of alternatives to exit the institutional municipals
business and determined that because of the complexities of selling the
business in the current market and limited market capacity for a business of
this size, a sale of the business was unlikely in the near term," the company
said in a statement.
UBS has said it plans to eliminate 7,000 jobs following $38 billion of fixed -
income asset markdowns. Investment banks and securities firms in the past 10
months have cut 83,000 jobs amid losses and writedowns of $383 billion.
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The company's action also follows the collapse earlier this year of the $330
billion auction -rate bond market, leaving investors with securities that they
couldn't sell. UBS cut the value of its customers' auction -rate holdings, which
were sometimes regarded as cash -equivalents, by about 5 percent in March.
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Page 2 of 3
2007, according to a Feb. 13 report from Charlotte, North Carolina -based Bank
of America Corp.
UBS will move some of its municipal bond personnel to its wealth
management operations, the company's statement said. The division will be
closed "through an orderly wind -down," which the company expects will last
over "the next few months."
UBS's share of the municipal bond business has been declining, and it now
trails Citigroup Inc. and Merrill Lynch & Co. after ranking first in 2004,
according to data compiled by Thomson Reuters.
"It's not the end of the industry, it's a reshuffling of the deck chairs," said Tom
Doe, president and founder of the Concord, Massachusetts -based Municipal
Market Advisors, a research firm. "It's a realignment of the industry."
Municipal issuance is expected to reach $400 billion this year, Doe said,
predicting that "a new firm will emerge."
The company's acquisition of PaineWebber Group Inc. in 2000 helped it secure
the top spot. PaineWebber ranked second among municipal market
underwriters when it was acquired. The decision by the firm to put more
bankers in offices outside of New York helped contribute to its success, Terry
L. Atkinson, the director of UBS's municipal securities group, said in
December 2004 interview.
Toll -Road Plan
UBS bankers helped New Jersey Governor Jon Corzine develop a plan earlier
this year to borrow against the state's toll -road revenue to retire state debt and
fund transportation capital projects. Corzine later dropped his proposal
following legislative opposition.
Management changes have coincided with UBS's difficulties. Chairman
Marcel Ospel resigned at the annual meeting in April amid losses arising from
the subprime mortgage market collapse. He was replaced by the bank's general
counsel, Peter Kurer.
Ospel's move followed departures of investment banking chief Huw Jenkins
and former chief financial officer Clive Standish. Peter Wuffli was forced out
as chief executive office by the bank's board of directors in July 2007 after the
closing of a hedge fund that lost money on subprime holdings.
JPMorgan Chase & Co., the third biggest U.S. bank, will cut its municipal
bond department by about 15 percent, a person familiar with the company's
decision said this week. The group has about 170 people. The move follows
the company's purchase of Bear Stearns Cos.
To contact the reporter on this story: Adam L. Cataldo in New York at
acataldo@bloomberg.net.
Last Updated: June 5, 2008 16:56 EDT
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