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Drexel puts holdings up for sale // Fallen Wall Street giant peddles $1-billion junk-bond portfolio

NEW YORK - Drexel Burnham Lambert Inc. took further steps Wednesday to dismantle an operation that once was the envy of Wall Street, shopping around businesses, liquidating its financial holdings and planning benefits for the thousands of employees likely to be fired. Details of the staggering financial troubles that caused the firm's demise were outlined in papers filed in U.S. Bankruptcy Court in Manhattan by Drexel's parent, Drexel Burnham Lambert Group Inc., which listed more than 2,000 creditors and close to $3-billion in liabilities. Fourteen of the top 22 listed unsecured creditors are foreign-owned companies. Among the U.S. creditors is ailing CenTrust Bank of Miami, which is owed $15-million.

Drexel and the parent still owe the government $50-million in September and $100-million in September 1992. The payments are part of a $350-million fund set up to reimburse investors as part of Drexel's settlement of civil and criminal securities fraud charges.

Drexel, an aggressive and entrepreneurial investment house that financed some of the largest corporate takeovers of the 1980s, collapsed following a steep fall in the value of its junk bond portfolio and an erosion of confidence in the aftermath of Drexel's admission it committed securities crimes.

Drexel Burnham Lambert Group filed for Chapter 11 protection from creditors shortly before midnight Tuesday after defaulting on $100-million in short-term debt and failing to arrange new financing.

It was the largest securities industry bankruptcy filing ever.

The filing affects only the parent company, not the securities subsidiary. Under federal bankruptcy law, broker-dealers are ineligible for Chapter 11 reorganization.

Drexel's parent company said it wants to continue operating its business and managing properties and to file a plan of reorganization with the bankruptcy court, but none of its securities-related holdings are expected to survive.

The broker-dealer business and a government securities operation were being rapidly liquidated Wednesday. Federal Reserve Board officials monitored the sale of Drexel's portfolio of Treasury securities, believed to be in the tens of billions of dollars.

Drexel's huge junk bond portfolio - estimated at up to $1-billion - also was being liquidated.

A spokesman for First Boston Corp. confirmed that representatives took a look at the Drexel junk bond portfolio, but he declined to characterize their interest in it. Also said to be picking through the inventory were Salomon Brothers Inc., Morgan Stanley & Co., Merrill Lynch & Co. and General Electric Credit Corp. Employees, meanwhile, packed boxes filled with personal belongings, computer printouts and files that were inspected by uniformed security guards as they left Drexel's downtown Manhattan headquarters. Many were stunned by the speed of the firm's demise.

"Maybe about a week and a half ago, we had management telling us that even though times were hard at Drexel, they were the same troubles the rest of the Street was having," said a Drexel junk bond professional in New York. "'Bear with us,' they said."

Resumes and phone calls from Drexel workers flooded other Wall Street firms, executives reported. Drexel has not formally laid off its 5,300 employees, but is devising severance packages, officials said.

At a Conference Board gathering Wednesday in New York, experts said the entire financial services industry is undergoing a restructuring that will lead to more conservative lending policies.

Senior Conference Board economist Vincent G. Massaro said that in 1981 roughly 7 percent of total corporate debt was rated "speculative" - junk - by Moody's Investors Service Inc., the rating agency. Last month, the figure was 20 percent, he said.

The percentage of companies' sales that goes toward debt payments has risen to the point where it has eroded competition within some sectors of corporate America, said Moody's president John A. Bohn Jr. He predicted the issuance of junk bonds would plunge by at least 50 percent this year and that attitudes would shift toward financial conservatism.

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