A senior executive involved with BondBook, the dealer-owned online corporate bond trading platform, says the company will likely shut its doors by the middle of November. Layoffs of its approximately 100 employees are slated to begin soon, he says. He attributes the decision to a series of meetings held in mid-September, during which the company's dealer owners began to express misgivings about continuing to fund the venture in a post-Sept. 11 landscape. BondBook has been hurt by the well-documented liquidity problems in the corporate bond market, but its $3 million monthly cash burn rate is more to blame, according to the executive, who was involved in the technological development of the company. He continues that when dealers are visibly reducing headcount by up to 20% in some instances, it is difficult to ask them to continue to invest in a "continuing cost-center."
BondBook's World Financial Center offices had been closed since Sept. 11 and it was operating at several different locations in the New York area. Gustavo Larramendi, coo, when reached at his residence, referred calls to Stephen Van Anden, the company's chief marketing officer, who did not return repeated calls to his home. Doug Donsky, a company spokesman, says "the company continues to evaluate all strategic options, and that no official decision has been made at this time."
A consultant involved with BondBook's operations says that of the eight dealers backing the effort--Credit Suisse First Boston, Lehman Brothers, UBS Warburg,Salomon Smith Barney, Deutsche Bank, Goldman Sachs, Morgan Stanley and Merrill Lynch--the decision to wind down operations came from the lead of Goldman. He said that on Sept. 17-18, meetings of the company's board, Goldman and Merrill led the argument that their corporate bond trading margins were being effected by both diminished spreads and the events of Sept. 11, and that they would no longer honor their trading volume commitments. This consultant says that an attempt has been made to sell the company, but no buyers have materialized. Spokesmen for Merrill, CSFB and Goldman declined comment.