By April Hall
An iconic family name doesn’t guarantee business success, as Alexandra Lebenthal found out.
Lebenthal & Co., launched by Alexandra’s grandparents in 1925, sold “odd-lot” municipal bonds to small investors. The company became a municipal bonds powerhouse under James A. Lebenthal, her father, and was eventually sold in 2001. It ended up as part of Merrill Lynch, which retired the Lebenthal company name in 2005.
A year later, Alexandra bought the name back for $1,000 and launched a new business with her dad — who passed away in 2014 — focused on asset management.
But now the future of Lebenthal is unclear given a host of financial issues. The firm’s board of directors announced this week Alexandra has stepped down as CEO and board member of Lebenthal Holdings, but will serve as managing member of Lebenthal & Co.
“It has been a significant challenge to launch a startup,” she said in a statement.
South Street Securities Holdings Inc. agreed to buy the asset-management business, in addition to 49% of the capital-markets unit, which underwrites corporate bonds. Lebenthal was expected to keep the family name with the 51% of the capital market business.
The announcement came on the heels of a lawsuit against Alexandra filed by former Bear Stearns CEO James Cayne, first reported by
Bloomberg
in February. The suit claims Alexandra failed to repay nearly half of a $1 million personal loan offered by Cayne in March 2008. At that time, it was reported, Alexandra was paying staff from her personal checking account. The filing claims Lebenthal offered to convert the balance of that loan into Lebenthal Holdings stock, but Cayne said he declined and pushed for repayment.
However, the South Street deal reportedly fell through before its closing at the end of May.
“This is not a case of [the Lebenthal] family business failing — this is a new business going through whatever its troubles are,” explains family business consultant Steve Salley, adding that the name needs to be separated from the business.
What Lebenthal & Co built its name on is a very different business from what it currently deals in, he points out.
When James A. Lebenthal took the reins from his parents, he became municipal bonds’ greatest cheerleader, advertising with taglines including “bonds are a cash cow” and “bonds are my babies.”
The new firm, under the old name and with Alexandra at the helm, became anchored in a multi-family office (family wealth management) and capital markets (serving as an intermediary between sellers in search of capital and buyers).
“It’s tough to put those two different things under one roof,” Salley says. “And it’s quite different from what the family business was.”
He says questions of continuity come into play with both reputation and, essentially, launching a start-up with an established name.
“There’s less continuity between the old Lebenthal everyone knew and what the new Lebenthal was,” he says. “It was buying a brand and putting it on a new venture.”
While Alexandra acknowledged the challenges,
“I am proud of the many things that we have accomplished in the last nine years, including growing our asset management business and creating the leading woman-owned broker-dealer in the United States,” she said in the statement. “I wish Lebenthal great success going forward.”
The Lebenthal companies could not be reached for further comment.
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