DREXEL SAYS BUSINESS STRONG DESPITE TRADE PROBE
Drexel Burnham Lambert Inc said
Wednesday its business is booming, despite its inability to
distance itself from the insider trading scandal that has
spread rumors and doubts through Wall Street.
    "For a company that's supposed to be under siege, we are
doing extremely well. We are exceedingly profitable," a
spokesman for the firm told Reuters.
    The rumors that have swirled around Drexel, more than any
other broker, have involved concerns that its business will be
threatened by the Federal probe, say Wall Street sources. The
firm has long been at the leading edge of the mergers business
and had ties to now-disgraced speculator Ivan Boesky.
    In the latest chapter of the story, Drexel said that some
commodities firms have begun to limit the amount of business
they will do with the firm, citing credit risks. Drexel has
long been a powerful competitor in precious metals markets.
    But Drexel spokesman Steve Anredder told Reuters that
Drexel's overall business is proceeding normally and the
first-quarter profit "could be the strongest of anybody on Wall
Street."
    "I wouldn't say we're not feeling any effect (from the
trading probes)," he said. "But we're doing extremely well."
    The firm was among the first to be subpoenaed in the
government's wide-ranging probe of illegal trading involving
the use of confidential company information on Wall Street.
    Believed to be under particular scrutiny was Drexel's "junk
bond" operation -- the issuance of high-risk speculative debt
that it pioneered for financing corporate takeovers.
    "We have done nothing wrong," said the Drexel spokesman.
"After a thorough investigation, we have found no evidence of
any wrongdoing by the firm or anyone within the firm."
    The spokesman said that in the aftermath of the Boesky
arrest, Drexel had not been charged. Nor had any individual at
the firm been charged with illegal acts while employed by
Drexel. One of its top merger specialists, Martin Siegel, was
charged in connection with a former job.
    Still, more than any other firm on Wall Street, Drexel has
suffered the consequences of the insider trading probe. To
begin with, there have been a series of brief shocks in the
junk bond market, in nervousness linked to rumors that Drexel
might be in trouble.
    At one point, Drexel said Wednesday, a large Midwest bank
refused to allow Drexel-issued bonds as collateral on credit
lines. Two weeks ago, the restriction was withdrawn, it said.
    The company also was notified last month that the outside
insurer of Drexel's individual brokerage accounts had decided
not to renew coverage. Drexel has set up its own subsidiary
handling part of the insurance. American International Group
and a group of British underwriters have handled the rest.
    Drexel also appears to have lost ground to others in the
mergers and acquisition business recently, market sources said.
However, Anredder said that there was no sign that Drexel had
lost any customers at all owing to the insider trading cases.
But in citing results for the quarter, the company points
mostly to other areas of success.
    Corporate financings have totaled 8 billion dlrs, including
3 billion dlrs in new junk bonds in the January-March period,
Drexel said. Drexel maintains the lion's share of this
lucrative business, trade sources noted.
    The market for junk bonds, although jittery, "has rallied
back with a vengeance," Anredder said.
    Although they see new competition in the junk bond arena,
market sources concur that Drexel remains king of the hill.
    While some of the leading Wall Street firms were limiting
head-to-head dealings with Drexel in the commodity markets 
based on worries over the credit of the company, the Drexel
spokesman called this "ridiculous."
 Reuter
