Tejas Securities unfazed by recent market turmoil, plans expansion using new financing proceeds

By Paul Deckelman

New York, Sept. 28 - The capital markets - still not fully recovered from the meltdown of 2007 to 2009 - have had a particularly rocky road over the past few months, on renewed investor fears stemming from economic uncertainty. It may not seem like the most propitious time for business expansion in the financial space - but Tejas Securities Group, an Austin, Texas-based independent full-service broker-dealer, believes there's no time like the present and is planning to do exactly that.

Fueled by the proceeds of a recent $8.475 million capital raise, the company is hoping to broaden the variety of markets in which it operates and the number of geographic locations.

Tejas (pronounced TAY-haas) hopes to scoop up some of what its managing director calls "dislocated human capital" - market professionals who have left other financial firms in the wake of the economic upheaval.

"With the state and condition of dislocation in the market, there are always opportunities to find within that storm cloud," Craig Biddle told Prospect News. "It's our belief that there are a lot of quality people and complementary businesses, as well as product lines, that are available in a market like we have today.

"It's a function of doing your homework and your due diligence and identifying where those opportunities lie - and then being smart about how you deploy your capital to aggregate that talent and to grow a platform like ours, and I think we're going to be very strategic in how we approach that. But we're excited at the opportunity we see in front of us and looking forward to executing our growth strategy in a way that will deliver results."

Tejas is owned by Westech Capital Corp., the Austin-based entity that raised $8.475 million last week via a sale of series A convertible preferred stock to key investors including its chairman, John J. Gorman IV, and its incoming chief executive officer, Wall Street veteran James B. Fellus.

The company currently operates in high-yield and distressed bonds - "our core competency," Biddle said - in municipal bonds and in structured products such as asset-backed securities ranging from investment grade down to distressed. The company also has an institutional equity group.

Biddle said that Tejas is in discussions with "a number of complementary business teams, and we expect those discussions to be finalized near-term."

He said that Tejas is additionally expanding its investment banking activities; its seven-person investment banking group, along with Craig-Hallum Capital Group LLC, recently completed "an important capital raise" - $35 million - for Function(x), Inc., a New York-based media content company run by billionaire entertainment industry entrepreneur Robert F.X. Sillerman.

"We are actively working on a range of [further investment banking] engagements," Biddle said.

With the additional capital, Tejas "plans to be expanding in all of those areas."

Retail distribution eyed

He said that "our business has mostly been an institutional business, although we are expanding into a retail distribution network as well, and we expect to grow that retail distribution network substantially over the coming months."

Biddle said the company's long-term goal is to become "a super-regional broker-dealer. There's a lot of very large bulge-bracket firms and there are a lot of smaller firms that haven't been able to maintain their net capitalization, and have not been able to weather the storm. We believe that there's a great opportunity for a firm in that middle ground to pull together and strategically aggregate quality people and have offices in a range of geographies."

The company currently operates out of Austin, with additional offices in New York, Chicago and Los Angeles. Biddle said that it will "also be expanding in other geographies near-term," based on the outcome of ongoing negotiations. He said additional announcements are likely "in the not too distant future," so "stay tuned."

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