Castle Creek Raising $500 Million

NEW YORK (Reuters) – Castle Creek Capital, a private equity firm that invests in banks, is looking to raise a new $500 million fund, a person with direct knowledge of the company's plans said on Wednesday.

The fund will be used to invest in community banks, for both recapitalization and consolidation, said the source, who declined to be identified because of the confidential nature of the plans.

The fund-raising process is expected to begin next month, the source said.

Castle Creek is one of the few private equity firms that make controlling investments in banks and other financial institutions, which puts it in a unique position as other buyout shops look to invest in the sector but are wary of regulatory restrictions that could come with it.

As bank stocks sink and leveraged buyouts deals dry up amid the global credit crunch, private equity firms are eyeing investments in the sector.

Last month, Washington Mutual Inc (WM.N: Quote, Profile, Research) and National City Corp (NCC.N: Quote, Profile, Research) each raised $7 billion, including minority investments from buyout firms.

Financial institutions globally have raised more than $250 billion of capital to offset massive credit losses and are likely to need more.

Castle Creek, which became a bank holding company in 1995, has said it has been approached by other buyout shops looking to invest in banks, as well as institutions looking to raise funds.

NEW YORK, May 21 (Reuters) – Castle Creek Capital, a private equity firm that invests in banks, is looking to raise a new $500 million fund, a person with direct knowledge of the company's plans said on Wednesday.

The fund will be used to invest in community banks, for both recapitalization and consolidation, said the source, who declined to be identified because of the confidential nature of the plans.

The fund-raising process is expected to begin next month, the source said.

Castle Creek is one of the few private equity firms that make controlling investments in banks and other financial institutions, which puts it in a unique position as other buyout shops look to invest in the sector but are wary of regulatory restrictions that could come with it.

As bank stocks sink and leveraged buyouts deals dry up amid the global credit crunch, private equity firms are eyeing investments in the sector.

Last month, Washington Mutual Inc (WM.N: Quote, Profile, Research) and National City Corp (NCC.N: Quote, Profile, Research) each raised $7 billion, including minority investments from buyout firms.

Financial institutions globally have raised more than $250 billion of capital to offset massive credit losses and are likely to need more.

Castle Creek, which became a bank holding company in 1995, has said it has been approached by other buyout shops looking to invest in banks, as well as institutions looking to raise funds.

By Paritosh Bansal