Howard Marks’s Oaktree Capital Management has opened a stake in Banc of California Inc (NYSE:BANC). According to a new 13G Form filed with the U.S. Securities and Exchange Commission, the fund owns 3.2 million shares, representing 9.9% of the company’s outstanding stock. The filing was issued right after Oaktree disclosed a huge increase in its stake in Star Bulk Carriers Corp (NASDAQ:SBLK).
Oaktree Capital Management was co-founded by Howard Marks in 1995 and is currently headquartered in Los Angeles. The private equity firm focuses primarily on alternative investments, while maintaining an emphasis on distressed debt, corporate debt and convertible securities. The company undertakes numerous marketable securities investments, including high yield bonds, convertible securities, high-income convertibles, and international convertibles. In addition, it boasts a balanced and diversified equity portfolio, which is currently valued at around $6 billion. Oaktree Capital Management has a distinct preference for companies that are less known by major institutional investors, often acquiring stocks discarded by other hedge funds. In addition to Star Bulk Carriers – Mr. Marks’ top pick – the fund’s largest positions last quarter included Dynegy Inc (NYSE:DYN) and First Bancorp (NYSE:FBP). Before founding and taking a taking on a leading role in Oaktree Capital Management, Mr. Marks was employed by TCW Group, where he worked for 10 years. During this time, he was tasked with overseeing investments in areas such as distressed debt and high yield bonds.
Banc of California Inc (NYSE:BANC) is a $296 million market cap bank holding company headquartered in Irvine California. The financial institution is a provider of retail banking products and services within the United States, including commercial and consumer loan products, commercial real estate loans, multi-family loans, small business administration guaranteed business loans, and construction and renovation loans. Furthermore, the company offers cash and treasury management, card payment, remote deposit, ACH origination, and employer/employee retirement planning services.
Since it was founded in 1941, Banc of California has grown considerably and currently operates a total of 80 banking locations. The company’s assets currently exceed $5.5 billion, following the acquisition of select assets of the California branch network of Popular Community Bank. In addition to assuming certain liabilities of the U.S. banking subsidiary Popular Inc (NASDAQ:BPOP), the purchase added twenty branch locations, around $1.1 billion in loans, and $1.1 billion in deposit balances to Banc of California’s total assets. In early December, Banc of California Inc (NYSE:BANC)’s Board of Directors announced shareholders would receive a quarterly cash dividend of $0.12 per share at the beginning of 2015. This cash dividend is subject to the firm’s Dividend Reinvestment Plan, which allows the recipients to convert the payment into a direct purchase of stock at a 3% discount.
The company’s recent positive announcements, however, were overshadowed by the launch of an investigation against the company’s Board of Directors in relation to possible breaches of fiduciary duty. Furthermore, shares of Banc of California have lost around 22.5% of their value over the past year. Considering Oaktree Capital Management’s preference for companies that are often considered to be contrarian investments, this underperforming stock seems like a great fit.
Although Banc of California Inc (NYSE:BANC) does not seem like a great investment opportunity at first sight, numerous institutional investors continue to bet on its success. Mark Lee’s Forest Hill Capital reduced his stake in the company by 26% during the third quarter, yet it still owns 1.1 million shares. William Black’s Consector Capital is even more bullish, with a position amounting to 1.6 million shares, representing 7.1% of the fund’s equity portfolio. Another institutional investor worth mentioning is Robert I. Usdan and Wayne K. Goldstein’s Endicott Management, which disclosed ownership of 1 million shares as of the end of the third quarter. However, the greatest display of optimism stems from Oaktree Capital Management, since it now holds the largest position in the company following its latest acquisition of common stock.
Disclosure: Pablo Erbar holds no position in any stocks or funds mentioned.
