Mike Smith,Merrill Lynch's last trader who focused exclusively on high-yield, walked off the desk last week, according to a member of the firm's high-yield department and several traders at rival firms. It could not be determined who was assuming Smith's duties. Smith could not be reached. Jeff Chandler, Merrill's new head of high-yield, declines comment on Smith. Rivals say that distressed trader Eric Dobbin was made head high-yield trader to fill the void, but Chandler insists that Dobbin has been responsible for distressed and high-yield bond trading since last late year, and that neither his title nor responsibilities have changed. Dobbin referred calls to Chandler.
Rivals and buy-siders continue to be baffled by Merrill's high-yield effort. A month into the year, the firm has not underwritten a high-yield deal yet this year. "I've got a couple of friends who work over there, and even they have no idea what's going on," says one trader at a rival firm. A high-yield head of one firm says he's never even heard of Chandler. Chandler, who has an investment-grade trading background, was previously global head of debt e-commerce.
Chandler dismisses the comments, arguing that rivals always criticize one another. "Let them baffle away," he says. In Merrill's defense, He argues that Morgan Stanley has not underwritten a genuine high-yield deal yet this year. Morgan Stanley placed 14th in the January Bloomberg U.S. high-yield underwriting rankings, with three deals to its credit.
As recently as the late 1990s Merrill was considered both an origination and secondary trading powerhouse, consistently holding down the third and fourth spots in league table rankings. But with the departure of leveraged finance chief Thomas Gahan to Deutsche Bank in 1999, the firm has steadily declined, falling to seventh in overall origination volume in 2000, and ninth in 2001, according to Bloomberg.