CRT Capital Group LLC is in talks to combine with Pierpont Securities LLC as fixed-income trading volumes fail to keep up with the market’s expansion, according to a person with knowledge of the matter.
CRT, the brokerage backed by Aquiline Capital Partners LLC, has been negotiating the terms of a merger with Pierpont since at least August, said the person, who asked not to be identified because the talks are private. No agreement has been reached between the Stamford, Connecticut-based firms and talks may not lead to a deal.
A deal combining the corporate credit, Treasuries and structured products businesses of the two firms would add to the consolidation this year of brokerages that expanded into debt trading after the financial crisis. Smaller firms are combining or closing as average daily trading volume falls to 0.3 percent of the $5.4 trillion U.S. corporate bond market from 0.5 percent of a $3.5 trillion market in 2009, according to data from the Financial Industry Regulatory Authority and Bank of America Corp. Gleacher & Co. said in April it was closing its fixed-income unit and Knight Capital Group Inc. agreed to sell its debt-brokerage to Stifel Financial Corp. (SF:US)
Tripp Kyle, a spokesman for Aquiline, said he couldn’t comment, as did Karen Ogden, Pierpont’s chief administrative officer. Ron Kripalani, chief executive officer of CRT, didn’t return an e-mail seeking an interview.
CRT expanded after receiving a $225 million investment from Aquiline, the private-equity firm led by Jeff Greenberg, in 2010, doubling its staff within two and a half years. The firm acquired Braver Stern Securities LLC’s sales and trading team in 2011 after that firm failed in an expansion bid. Greenberg was the former chairman and CEO of Marsh & McLennan Cos. before founding Aquiline in 2005.
Pierpont, which expanded with $200 million from Stone Point Capital LLC and General Atlantic LLC in 2010, decided to exit the high-yield bond and loan business as 11 people resigned, Karen Ogden, the firm’s chief administrative officer, said Sept. 3. Pierpont said it was merging with Cortview Capital Holdings Inc., which received a $125 million commitment from Warburg Pincus LLC, according to a statement from the firm at the time.
Private-equity firms saw an opportunity to invest in broker-dealers as the biggest Wall Street firms reduced the amount of capital they committed to facilitate bond trading in the wake of Lehman Brothers Holdings Inc.’s collapse in 2008. The 21 primary dealers that do business with the Federal Reserve reduced their holdings by 76 percent from the peak in October 2007 through the end of March, when they started reporting the data differently, according to data from the central bank.
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