WL Ross, the turnaround-focused private equity firm of US financier Wilbur Ross, has joined an investor group that together will inject $100 million into Sun National Bank, the second largest commercial bank in New Jersey.
The deal will give WL Ross a 24.9 percent stake in the bank. The investment prices the bank's shares at $4 each. Included in the group of co-investors is the bank’s founding Brown Family, also its largest shareholder. Half of the $100 million investment reportedly came from Ross’s firm, according to the New York Times.
Ross did not return a call for comment Thursday. The New York-based firm is raising its fifth distressed private equity fund, targeting $4 billion, according to a fundraising report from RR Donnelley. It is unclear if the Sun National investment came from the fifth fund or the prior fund.
In August, the Federal Deposit Insurance Corporation established rules calling for an acquired financial institution to be capitalised at a Tier 1 leverage ratio of 10 percent, lower than the 15 percent originally proposed. A proposal requiring private equity owners to serve as a source of strength for the banks they invest in was removed altogether, but the rules still stipulate that private equity firms must hold their bank investments for at least three years.
Sun National is not the first bank to have caught WL Ross’ eye. In May 2009, the firm teamed up with The Carlyle Group, Blackstone and Centerbridge Partners to back a $900 million buyout of Florida-based BankUnited. Ross also purchased more than a 68 percent stake of First Bank & Trust Co., another Florida-based bank with $83 million in assets.
The investment by WL Ross marks the latest in a recent trend of private equity firms acquiring US banks. In May, the Carlyle Group purchased roughly $73 million in common stock from Virginia-based Hampton Roads Bankshares as part of a $255 million capital raise for the bank owner and operator.