In what would be its first deal since creating a fund to invest in undervalued banks last year, bond giant Pacific Investment Management Co. is seeking regulatory approval to buy a roughly 20% stake in ECB Bancorp Inc. in Englehard, N.C.

Reuters reported late Wednesday that the Federal Reserve Bank of Richmond is reviewing PIMCO's application to invest $25 million in ECB as part of the banking company's $79.7 million recapitalization.

ECB, the parent of East Carolina Bank, is raising the capital through a private placement and intends to use a portion of the proceeds to pay off the roughly $18 million it received from the Troubled Asset Relief Program and to purchase seven North Carolina branches from rival Hampton Roads Bancshares of Norfolk, Va. The $942 million-asset ECB intends to sell nearly 5 million shares at $16 each to PIMCO and several other institutional investors, including Patriot Financial Partners in Philadelphia and Endicott Management in New York.

ECB's shares were trading at around $11 early Thursday, though the lender's stated book value is roughly $21.71 a share. PIMCO is the world's largest bond fund and is managed by its well-known founder, Bill Gross.

Since establishing the Bravo Fund — Bravo stands for Bank Recapitalization and Value Opportunities — Newport Beach, Calif.-based PIMCO has raised roughly $2.3 billion to invest in ailing or undervalued banks. Under terms of its deal with ECB, PIMCO's fund would acquire 1,575,000 of ECB's shares now and would be given the right to participate in any future equity offerings by the bank, according to Reuters.

If the Fed approves the transaction, PIMCO's Bravo Fund would become the largest investor in ECB.

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