Banks, the Backbone of PIPE Activity

Oaktree Capital Management has agreed invest about $175.5 million in First BanCorp (NYSE: FBP) through the purchase of common stock priced at $3.50 apiece. The investment is conditioned upon the bank holding company raising a total of between $500 million and $550 million of new capital. Including the agreement with Oaktree, First BanCorp has already secured a total of $515 million in commitments. Thomas H. Lee Partners is also among the investors who have agreed to back the company.

PE investors have completed 79 PIPE deals since the beginning of 2009, according to the PitchBook Platform. PIPE deal activity increased from 30 completed deals in 2009 to 42 in 2010. However, the median deal size fell from $50 million to $35 million over the same time period, revealing that although PE investors were closing more PIPE deals, they were opting for smaller investments. So far this year, 7 PIPE deals have been completed with a median deal size of $18 million. Accounting for 29% of the PIPE deals during the last two and a half years, Financial Services has been the most popular industry for the deal type thanks to strong activity in the Commercial Bank sector.