Bond giant PIMCO closing in on first bank deal

Wed Sep 21, 2011 5:38pm EDT
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By Matthew Goldstein and Jennifer Ablan

NEW YORK (Reuters) - A $2.3 billion investment fund managed by bond giant Pacific Investment Management Co that is largely targeting distressed U.S. banks is trying to get regulatory approval for one of its first major transactions -- a deal involving a North Carolina community bank.

The Federal Reserve Bank of Richmond is reviewing an application for a company set-up by the year-old PIMCO Bravo Fund to acquire an ownership stake of roughly 20 percent in ECB Bancorp Inc ECBE.O.

The PIMCO fund is making a $25 million investment in the parent company of The East Carolina Bank as part of a $79.7 million recapitalization of the Engelhard, N.C. based lender. The PIMCO Bravo fund is the single largest investor in the deal announced in June by the bank, which has 25 branches and about $945 million in deposits.

"I have always described this as partnership," A. Dwight Utz, ECB Bancorp's president and chief executive officer, said about the deal with PIMCO and five other investment firms.

In dollars, the transaction is small, but it appears to be the first investment in a bank by the PIMCO Bravo fund, which has aggressively raised money from retail investors for over a year.

PIMCO, home to the world's largest bond fund and managed by its highly-visible founder, Bill Gross, was recently granted full control of its various investment products by its parent company, Allianz SE (ALVG.DE: Quote) -- a move that gives the Newport Beach, Calif. firm more independence to expand into new businesses.

This latest move, which follows PIMCO's major push into equities, could make Warren Buffett-style profits by purchasing stakes in distressed and undervalued U.S. banks still struggling to get by in the wake of the financial crisis.

In July, PIMCO sought to raise $600 million for real estate investment trust PIMCO REIT Inc, which plans to invest in residential mortgages and provide an alternative to government-sponsored enterprises Fannie Mae FNMA.OB and Freddie Mac FMCC.OB.   Continued...

<p>Mohamed El-Erian, Chief Executive Officer and Co-Chief Investment Officer, Pacific Investment Management Co., participates in the "From Recession to Recovery" panel at the 2010 Milken Institute Global Conference in Beverly Hills, California April 26, 2010. REUTERS/Phil McCarten</p>