DICK YOUNGBLOOD; STAFF WRITER

Allison-Williams Co., one of the area's oldest investment banking firms, has been in existence since 1919, when the company was bought by the late Elmer Williams and his partner, Bill Allison, who recently turned 100.  But its roots go back to 1880 and an Iowa company that came to be known as Drake-Jones Inc.  Allison who? Drake what?  Oh, yeah, I forgot to mention that Allison-Williams, which specializes in private placement of corporate debt, with an occasional municipal placement thrown in when the price is right, also has maintained a barely discernable profile throughout its 78 years.  Indeed, a check of the Star Tribune's electronic morgue shows just a dozen mentions in the past 12 years, all of them brief and routine.

A varied history

Yet, Allison-Williams is a firm with a rich and varied history that includes the partners' pre-World War II ownership of Alaska Airlines, their post-war participation in much of the municipal financing that accommodated the Twin Cities' exploding suburban growth and their major role in creating a secondary market for corporate debt securities.

Consider: A municipal bond house through most of its history, Allison-Williams helped finance sewer, water and street bonds in the early 1960s for Foster City, a suburban San Francisco community created out of the fill dredged from the city's famous bay.

Consider: When suburban Twin Cities debt for street and utilities construction was rated at near-junk bond level in the 1950s, Allison-Williams tapped its national client list of institutional investors and convinced them that the real value of the projects far exceeded the assessed value. The result: a flow of fresh construction capital at far more reasonable rates.

By the early 1990s, however, the margins on these traditional municipal deals began to narrow as competition grew from full-service brokerage houses. In 1991 the company stopped underwriting municipal bonds and suspended its retail trading, a move that cut employment from 60 to 15.

However, revenues did not decline nearly as precipitously:  Annual income has bounced between $3.5 million and $5 million in the past five years, according to co-owners Bob Tengdin and John Bly, compared with about $6.5 million before municipal bond trading was halted.

The reason: Allison-Williams was evolving into a thriving business that uses its long-standing relationships with institutional investors to create trading markets for what Bly, the company's president and CEO, calls "obscure and difficult credits."  

"Exotic" might be a better word. For example, Allison-Williams once found a market for the notes on a group of mission churches run by a predecessor of the Evangelical Lutheran Church in America.  For another example, it now owns a Lowe's and three Wal-Mart stores, part of a program in which the firm buys the stores from developers, arranges permanent financing and packages the properties for sale to investors seeking capital gains deferrals on other real estate deals.  Allison-Williams even took a flier one time to acquire and trade royalty interests in Listerine - securities that dated back to the 1880s.

"We're always looking for niche opportunities," said Bly, 61, with delightful understatement.  That's why Allison-Williams in recent years came into possession of a New Haven, Conn., bed-and-breakfast, a Texas fish farm and a collection of business equipment ranging from airplanes to oil rigs to a working tugboat.  

There's a simple explanation: From the late 1980s until the mid-'90s, Allison-Williams turned a nice piece of change assembling investor groups to acquire the debt and collateral of failed banks and S&Ls from the Federal Deposit Insurance Corp. and the Resolution Trust Corp.

The company is best known, however, for using its contacts with institutional investors - banks, insurance companies and pension funds - in the late 1960s to pioneer a secondary market for privately placed corporate bonds and other debt instruments.

Traditionally, fixed-income investors had a buy-and-hold mentality, said Tengdin, the company's chairman. But by the late'60s, pension fund managers were beginning to apply much the same performance measurements to corporate debt instruments as they imposed on equity funds.

A pioneer

Allison-Williams was one of the first - Tengdin argues it was the first - investment banking firm to create a separate department to focus on buying and reselling private placements and thus provide the requisite market liquidity.

Since then, the company has placed more than $5 billion of these securities and remains a dominant player in that market in competition with the likes of Merrill Lynch, Goldman Sachs and Salomon Brothers, Tengdin said. About $350 million of the securities will be placed this year, he added.

Thanks to the fact that Tengdin, 67, is a world-class slalom racer in the 65-and-over category, Allison-Williams also is picking up some foreign business.  When he was competing in the national Alpine masters championships in Norway and Sweden last year (he placed first in Norway, third in Sweden), Tengdin whiled away his free time visiting bankers and insurance executives seeking tips on potential business.  The result: He came home with a deal to place $66 million of debt for a Swedish construction company with U.S. investors.

© Copyright 1998 Star Tribune.  (Republished with permission)

Published: November 10, 1997
Edition: METRO
Section: BUSINESS
Page#: 2D