Fee-based Banking Services Offer Chance of Big Risks, Big Rewards. (Originated from The Charlotte Observer, N.C.)

Mar. 5--Dan Copeland, who runs family-owned Ploof Truck Lines Inc. in Jacksonville, Fla., found himself in need of some hefty financing last year when his father announced his retirement and asked Copeland to buy out his 51 percent stake in the company.

Copeland needed $13 million. Cheap financing was a big priority. He went to First Union to talk about a loan. He knew the bank because it had helped him set up a paycheck-cashing service and retirement plan for his 725 employees. His family was a longtime customer of two Florida banks that First Union bought.

Instead of getting a loan, he ended up on a plane to Charlotte, where a First Union investment banker promised to provide Copeland cheaper financing through something called a private placement.

For a fee, First Union found two life-insurance companies willing to provide the $13 million in return for company notes, which are like an IOU. Ploof agreed to repay the $13 million, plus interest at a low fixed rate, by 1999. Had he gotten a loan, he would have paid a higher, floating interest rate - at a time interest rates were rising.

As recently as 1993, First Union wasn't able to do private placements, said Jerry Schmitt, a managing director of First Union's Capital Markets Group. It would have had to simply wave goodbye to Copeland and pass him off to an investment firm.

Private placements are among a raft of nontraditional bank businesses that First Union and its rival in Charlotte, NationsBank, are moving into with all the momentum of a freight train. They are advising companies on mergers. They …