Peltz Brings the Old Band From Drexel Back Together

As posted by: Wall Street Journal

The Drexel Burnham band is reuniting for one last go around.

Nelson Peltz, a 1980s junk-bond player, has recruited two friends from the old Drexel Burnham Lambert bond shop to play in today's credit markets.

Former Drexel bankers Jay Bloom and Dean Kehler are joining Mr. Peltz's investment vehicle, Trian Partners, at what they believe is a low point in the credit cycle. Trian has several billion dollars at its disposal to deploy in all types of credit investments, such as corporate bonds, bank loans or the outright purchase of ailing companies through their debt.

The move unites a group of people who earned their stripes together at the height of the 1980s junk-bond era, which was symbolized by the rise and fall of Drexel and its bond chief, Michael Milken.

Messrs. Kehler and Bloom said their current firm -- called Trimaran Capital Partners -- had been discussing a venture with Trian for more than a year but was waiting until credit markets had neared a bottom. "It's 1990 all over again," said Mr. Bloom, referring to the last recessionary period, "but it's so much bigger and so much broader."

Mr. Peltz's new focus on bonds is a telling sign of the market. In the past three years he has remade himself into an activist hedge-fund manager with Trian, taking equity positions and agitating for changes or board seats at companies. The firm owns 22% of the publicly traded Wendy's/Arby's Group Inc.

But in the past three months, bond prices have moved to historic lows. "At the risk of hyperbole, this might be a once-in-lifetime opportunity," said Ed Garden, Trian's vice chairman.

Messrs. Bloom and Kehler worked at Drexel for Apollo's Leon Black, who helped develop the junk-bond market with Mr. Milken. When Drexel collapsed, Messrs. Bloom and Kehler formed junk-bond boutique Argosy Group, which was sold to Canadian Imperial Bank of Commerce in 1995.

Mr. Peltz and his longtime business partner, Peter May, worked with Mr. Bloom on what would become one of Messrs. Peltz and May's defining deals: the financing and mid-1980s purchases of National Can and American Can. The two eventually sold the combined company for a roughly $800 million profit.