Merrill Lynch in Westside Growth

Beverly Hills, the city that Drexel Burnham Lambert single-handedly turned into the high-yield “junk bond” capital of the world, may soon have a second junk bond giant.

Merrill Lynch, among many Wall Street firms battling to cut into Drexel’s leading share in the $190-billion junk bond market, is looking for an office for a new West Coast junk bond and merchant banking operation. The firm is looking in Beverly Hills, Westwood and the surrounding area, Jerome P. Kenney, president of Merrill Lynch Capital Markets in New York, said in an interview Thursday.

The move is in recognition of the many junk bond issuers and investors cultivated in California since Drexel and its former junk bond impresario, Michael Milken, moved those operations to Beverly Hills from New York more than a decade ago.

Merrill plans to more than double its current Westwood operation, which employs 15, all in investment banking, Kenney said. But the building in Westwood doesn’t appear to be large enough for the expansion, he said.

As a first step in building a West Coast junk bond presence, Merrill recently hired two salesmen from Drexel’s Beverly Hills office, Jay Jablonow and John Toland. Other large Wall Street firms also have a few junk bond personnel in the Los Angeles area, but none to rival what Drexel has now or what Merrill hopes to have. Merrill plans to build up to about 12 junk bond professionals in the Los Angeles area, Kenney said.

He noted, however, that Merrill’s planned buildup is not directed at Drexel specifically.

“We’re not trying to go into war with Drexel,” Kenney said, noting that Merrill has been working jointly with Drexel on a number of recent junk bond deals. “We’re interested in working well with their client base.”

Said Drexel spokesman Steven Anreder of Merrill’s move: “We wish them well.”