PackWest Shares Gain Profit as Bank Sells $3.5 Billion in Loans

Key TakeAway

• PacWest shares surged by nearly 7% during the initial trading session on Monday following the disclosure of its decision to divest a loan portfolio worth $3.5 billion to Ares Management.
• Ares stated that the portfolio comprises top-tier, first lien, collateralized debt obligations.
• PacWest has been actively fortifying its financial stance subsequent to the destabilization caused by the collapse of two significant regional banks in the industry.

PacWest's (PACW) shares experienced an uptick of approximately 7% during early trading on Monday, following an agreement between investment manager Ares Management Corporation (ARES) and the struggling regional bank to acquire a distinctive $3.54 billion loan portfolio in the specialty finance sector.

Ares highlighted that the portfolio comprised of "superior quality, senior secured, asset-backed loans" originating from PacWest's Lender Finance Unit. Ares specifically mentioned that the debt encompassed consumer loans, small business loans, timeshare receivables, auto loans, asset manager and fund finance loans, as well as residential and commercial real estate loans. PacWest emphasized that the initial portion of the transaction concluded last week, generating proceeds of $2.01 billion prior to accounting for transaction expenses.

Jeffrey Kramer, collaborator and portfolio overseer in Unconventional Credit at Ares, stated that the transaction will "diversify and enrich" the organization's Unconventional Credit portfolio. Joel Holsinger, collaborator and co-leader of Unconventional Credit, added that Ares' magnitude and adaptable mandates in the private credit market render it "an exemplary collaborator to the banking sector as they optimize their balance sheets and fortify their financial standing." PacWest CEO Paul Taylor expressed that the agreement "will enhance our liquidity and capital as we persistently execute our proclaimed strategy to refocus on community banking grounded on strong connections."

PacWest was among a cluster of intermediate-sized banks that faced strain subsequent to the March downfall of Silicon Valley Bank and Signature Bank. The bank has been implementing measures to reinforce its financial standing, such as divesting $5.7 billion in loans to the real estate investment enterprise Kennedy Wilson Holdings (KW). Kennedy Wilson Holdings received the initial portion earlier in the current month.

The announcement resulted in an upswing in PacWest Bancorp shares, although they have witnessed a decline exceeding two-thirds of their worth since the banking upheaval in March. Ares Management Corporation shares also observed an upward trajectory.