Pimco Said to Seek at Least $1 Billion for Fund to Buy Troubled Bank Loans

Pacific Investment Management Co., manager of investment funds world's largest, is growing at least $ 1 billion for a private fund to buy bad loans from banks to divest assets to meet the new standards, said two people briefed on the plans.

The Pimco fund Bravo, an acronym for Opportunity Bank Recapitalization and value, will acquire the commercial and residential mortgage loans and other debts, according to a potential investor who declined to be identified because the increase in private capital. Pimco plans to work with a loan manager to renegotiate the terms of the debt incurred directly with creditors, the client said.

Financial institutions are selling assets after the 27 - nation of the Basel Committee on Banking Supervision adopted regulations in September that more than twice the proportion of capital that banks must hold in relation to the amount of risk on their balance sheets . Pimco, the company Newport Beach, California, best known for its fixed-income mutual funds, such as those run by Bill Gross, has raised at least $ 5 million for institutional clients to buy distressed mortgages and bonds backed by property loans roots as the global credit crisis began in late 2007.

"The assessment is in the wheelhouse of Pimco, and the value is really the main challenge of this type of investment," said Geoff Bobroff, an independent fund consultant in East Greenwich, Rhode Island, in a telephone interview.

The Pimco Distressed Mortgage Fund LP, opened before the peak of the crisis in October 2007, returned 54 percent in the year ended Sept. 30 after losing nearly a third of its value in 2008, the investor said. The Pimco Distressed Senior Credit Opportunities Fund soared 28 percent in the year to September, according to the investor.

'Problem' Banks

The number of banks considered "problem" lenders by the Federal Deposit Insurance Corp. rose even with economic recovery, and bad loans remained on balance sheets. The list of FDIC increased 7 percent in the second quarter to 829 banks.

Pimco institutional funds should target small lenders and community banks, and will not buy consumer debt such as credit cards and auto loans, said the investor. Mark Porterfield, a spokesman for Pimco, declined comment.

"Pimco is using a winning combination of strategies to take advantage of dislocations in the banking system," Eric Petroff, director of research at consulting firm associated Wurts in Seattle, said in a telephone interview.

Dozens of fund managers have opened funds to invest in mortgage-related advantage of low prices as the market began to unravel three years ago. Most, like Pimco Bravo, are aimed at institutional investors such as pension funds and endowments.

Cargill, DoubleLine

An investment unit of Cargill Inc., food manufacturer based in Minneapolis, said last month that raised 373 million U.S. dollars to buy assets from banks' debt. DoubleLine Capital LP in Los Angeles, started by former TCW Group Inc., Chief Investment Officer Jeffrey Gundlach, brought $ 79,000,000 for a fund to invest in mortgage-related assets, according to the November 2 filing the Securities and Exchange Commission U.S.. Headquartered in Chicago, Ken Griffin's Citadel LLC raised $ 225 million for a fund residential mortgage opportunities, according to a regulatory filing in August.

Distressed securities are mostly loans and low-skilled, high-yield bonds whose issuers are struggling to meet interest and principal payments. They usually sell below face value and investors may benefit if prices rebound or securities are exchanged for equity in a restructuring.

The instruments plunged in value two years ago, when investors shunned all but the safest of government-backed debt after the failure of Bear Stearns Cos. and Lehman Brothers Holdings Inc., U.S. Bank America Merrill Lynch high yield Distressed index fell 45 percent in 2008, followed by a record profit of 117 percent in 2009 as the markets recovered. In the 12 months ended Sept. 30, the index rose by 29 percent.

Pimco's expansion

Pimco, began in 1971 primarily as a store-oriented link traditional United States, has expanded in emerging markets and hedging strategies fund style. Under Mohamed El-Erian, who was appointed CEO in late 2007, the company has opened long-term funds try to minimize the risks of systemic crisis and opportunistic funds seeking to take advantage of temporary market disruptions, such as distressed-debt vehicles.

Last year, the company made an effort in stocks and actively managed exchange-traded funds. The Pimco fund company Pathfinder NCA, which invests in global stocks undervalued, also devote a portion of the assets of distressed debt.

Pimco added a consulting arm in 2009 to help customers value the mortgage-related investments and other securities. The division, Pimco advisory work has won the National Association of Insurance Commissioners to help evaluate investment home loan, by insurers and the Federal Reserve, which runs the Commercial Paper Funding Facility .

Output PPIP

Pimco, with about $ 1.2 billion in assets, was one of the main public-private management of the U.S. Treasury Investment Plan before it was reduced last year, citing the "uncertainty" about the design of the program. PPIP, supervised by eight directors, including New York, BlackRock Inc., is the intention of buying undervalued real estate assets to accelerate the recovery of financial markets.

A unit of Munich-based insurer Allianz SE, Pimco runs the Return of $ 255 900 000 000 Pimco Total Fund, managed by Gross. The fund had 39 percent of assets in mortgage-related debt from October 31, according to the company website background.