Money & Investing

World Trade Center Fund Gets a Gift
From Northrop Grumman Underwriters

By RAYMOND HENNESSEY
Dow Jones Newswires

Wall Street underwriting is known as a cutthroat business. But that doesn't mean the underwriters don't have a conscience.

As part of a sale of eight million shares of Northrop Grumman Corp., underwriters plan to donate 25,000 Northrop shares to the Twin Towers Fund, the charity set up by the City of New York to help victims of the Sept. 11 terrorist attacks.

Each underwriter taking part in the syndicate on the deal, led by Citigroup Inc.'s Salomon Smith Barney and J.P. Morgan Chase & Co.'s JP Morgan, will donate shares to the fund proportionate to the shares which they are allotted to sell in the offering.

As a result of the donation, underwriters will be forgoing their traditional fees for those shares.

Known internally among underwriters as a "heroes tranche" and disclosed late Friday in a filing with the Securities and Exchange Commission, the idea came about when Northrop's deal was first being organized, around the time that the U.S. bombing of Afghanistan began, according to people familiar with the terms.

The nature of the company and its tangential connection to the aftermath of the Sept. 11 attacks make it a seemingly good fit for a donation of this type. Northrop Grumman, based in Los Angeles, makes many of the systems used in the F-16 and F-22 fighters, as well as the Longbow Apache helicopter, the AWACS radar plane and several missiles -- all of which are being used in the attack on Afghanistan.

In fact, the idea came to mind when bankers saw soldiers on television painting "NYPD" and "FDNY" on several of the bombs, according to people involved in the offering.

Though the idea was devised by the book-runners on the deal, none of the co-managers balked. "We didn't get anyone at all pushing back," one banker said.

Whether it becomes a trend among underwriters to donate something to the Sept. 11 funds from other equity capital markets deals remains to be seen. A banker involved in the Northrop offering said it is being done "definitely [on] a case-by-case basis."