The fate of a Chicago-based investment firm that has suffered continuous losses and undergone three top-management changes since a Mexican group bought it four years ago may be decided soon.
But F.L. Kirby, a broker with Rodman & Renshaw Capital Group Inc. who was named its interim president and chief executive officer Oct. 27, said he is optimistic that the nearly 50-year-old business can survive.
His current situation Kirby said, is “nowhere near as tough” as his experience as a helicopter pilot in Vietnam, where he was shot down and spent two hours on the ground in enemy territory before being rescued.
“Survival was the word then and it’s the same today with the company,” he added.
Kirby is going ahead with a major renovation of a half-floor in Sears Tower, where he plans to consolidate Rodman’s operations Dec. 19. It now has about 70 employees on 1 1/2 floors, less than half the number when it moved into the expensive space two years ago. The vacated floor will be subleased.
Four days before Rodman’s moving plan, a new six-member board of directors is scheduled to take control of the firm. It will include two “interveners,” representing the Mexican National Banking and Securities Commission, which seized control of Rodman’s trouble-plagued parent, Abaco Grupo Financiero SA, in August. The new lineup also includes a New York consultant specializing in corporate restructurings.
Kirby expects KPMG Peat Marwick LLP in about four weeks to deliver a report analyzing the brokerage firm’s strengths and weaknesses and suggesting future strategies. Abaco, which continues to own 70 percent of Rodman’s common stock, is paying for the study.
“The thrust of where we are going will probably be determined at that time,” said Kirby, who flies every few days between the firm’s headquarters and largely retail-oriented office in Chicago and New York, where its investment banking operations are centered. At the same time, he is trying to take care of his own book of clients.
“I took on this responsibility only with the understanding that I would not give up my customers,” he said. “It hasn’t been easy.”
Abaco’s chairman, Jorge Lankenau Rocha, resigned as a director and chairman of Rodman last month after being arrested in Mexico. Mexican authorities accused him of fraud following the collapse of an offshore investment fund in which Banco Confia, another Abaco subsidiary, was a big investor.
Rodman’s future is further complicated by the fact that New York’s Citicorp has agreed to acquire Confia. The bank has made millions of dollars in loans to Rodman to bolster the brokerage firm’s capital and offset its losses. Citicorp has said it’s not interested in acquiring Rodman as part of the deal.
Abaco bought control of the Chicago firm shortly after the North American Free Trade Agreement was adopted. The hope of both companies was to forge a strong investment banking link to develop financing deals on both sides of the border. But Abaco and its banking unit ran into trouble the next year when Mexico’s economy and the peso plunged while interest rates soared.
Rodman’s own financial situation has worsened this year. It reported a net loss of nearly $21.9 million for the first nine months, widening from a year-earlier loss of $13.3 million. Revenues sagged to $25.5 million from $46.7 million.
“About 65 percent of this year’s loss had nothing to do with our operations,” Kirby said. “Some of it involved settling litigation and other matters going back to 1994. We reached settlements on some contracts of previous employees in the third quarter of this year. We actually came close to breaking even in October from operations.”
Kirby said he will urge Abaco and the Mexican authorities to allow Rodman, now publicly held, to go private and give its employees an opportunity to own stock in the firm. He also said he hopes Abaco will remain a minority holder and pay off Rodman’s debt.
Rodman’s common stock closed Thursday at 28 cents a share on the New York Stock Exchange. Abaco paid $10.50 a share for 51 percent of the firm’s stock in December 1993 and $8.50 for another 19 percent in 1994.
Kirby argues that the firm still has a strong operational base in Chicago, New York and San Francisco and a solid core of retail and institutional customers despite its travails, which go back several years before Abaco entered the picture.
“The employees will have more incentive if they become part owners,” Kirby said. “When you lease a car, you’ll take it to a car wash and not care if it has stiff brushes. But if you own it, you’ll wash it by hand or go to a car wash with soft brushes.”
