10. Michael Milken: Moving Junk Bonds to Prominence

Michael Milken was a pivotal figure in late-twentieth-century bond markets. He unearthed a slumbering junk bond market and catapulted it to the forefront of the credit markets. In the process, he encouraged many bond market participants to embrace higher risk. The debt instruments he packaged and sold through Drexel Burnham Lambert helped fuel a wave of leveraged buyouts and other corporate takeover gambits, including several major deals put together by Kohlberg Kravis Roberts in the late 1980s. KKR found that negotiation with a “highly confident” letter from Drexel in hand—in which Milken offered strong assurances he would underwrite a deal—was a powerful bargaining chip. Milken’s below-investment-grade bonds also were embraced by many small and medium sized firms hungry for growth capital as well as by stalwart institutional investors. Mr. Milken and Drexel made billions of dollars in profits before the wunderkind investor was indicted and sent to prison.