PacWest sells $3.5bn loan portfolio to asset manager Ares

NEW YORK: PacWest Bancorp unveiled a deal on Monday to sell a $3.54 billion lender finance portfolio to asset manager Ares Management, its latest move to strengthen its balance sheet after it was rocked by the US regional banking crisis.

The deal, which helped drive up PacWest shares by more than 6%, came after it said in May it was evaluating asset sales.

“This transaction will improve our liquidity and capital as we continue to implement our announced strategy to return our focus to relationship-based community banking,” PacWest Chief Executive Officer Paul Taylor said in a statement.

PacWest and other regional lenders have turned to the Federal Reserve’s Bank Term Funding Program to buoy their liquidity in the wake of the crisis that unfolded in March. While this has helped them stay afloat, it has not allowed them to replenish the capital they need to engage in long-term lending.

As a result, PacWest turned to asset sales. Since late May, it has sold its real estate lending unit and much of its real estate loan book.

“This and the prior loan sale are going to build capital levels nearly 200 basis points in the quarter. That should give people better comfort about the health of the balance sheet,” said Christopher McGratty, head of US bank research at KBW.

PacWest said the lender finance portfolio consisted of high-quality, asset-backed loans from a variety of borrowers. It included consumer and small business loans, as well as lending on autos and real estate.

Banks have been offloading their best-rated debt, typically with floating interest rates so they do not have to write down the value of the loans because of the current high rates.

Alternative asset managers such as Ares have been eager buyers of these loans. Peer Blackstone has been vocal about its desire to secure more.

PacWest said it fetched $2.01 billion from selling the first part of its lender finance portfolio, with further tranches to close later.

Ares said its alternative credit arm bought PacWest’s loans, with financing from Barclays.