PacWest Bancorp sold a $3.5 billion asset-backed loan portfolio to Ares Management Corp., the latest example of a bank seeking to improve liquidity by selling assets to private investment firms.
(Bloomberg) — PacWest Bancorp sold a $3.5 billion asset-backed loan portfolio to Ares Management Corp., the latest example of a bank seeking to improve liquidity by selling assets to private investment firms.
Ares’s Alternative Credit funds bought the specialty finance portfolio backed by assets including consumer loans, mortgages and timeshare receivables, the fund manager said in a statement Monday. PacWest said in a filing that the first tranche of the deal closed last week and generated $2 billion of cash proceeds before transaction costs.
Private equity and private credit shops are among the few firms with the capital and appetite needed to buy sizable amounts of consumer assets originated by bigger banks. Other lenders are dealing with their own liquidity issues, and some are also already integrating recent purchases.
“This opportunity set really is only for some the largest asset managers,” Joel Holsinger, co-head of alternative credit at Ares, said in an interview. “You need to be able to speak for billions.”
Even so, alternative-asset managers have been frustrated in some of their attempts to take advantage of turmoil in the industry to buy pieces of banks or pools of assets. US regulators have instead selected other banks to deal with collapsed lenders. While private-investment firms’ efforts to participate in regulator-led sales of Silicon Valley Bank and Signature Bank faltered, bids for assets from lenders that are still operational have proven more successful.
“This is the first inning of the activity,” Holsinger said. “What we bought in this first stage — what the banks are selling right now — are their highest quality assets that are short duration and floating rate.”
Read More: FDIC’s Busted-Bank Sales Leave Private Equity Firms Empty-Handed
PacWest, a Beverly Hills-based regional bank, is bolstering its finances after runs on deposits struck several regional lenders earlier this year, leading to the collapse of three California-based banks and one in New York.
Earlier this month, it completed the first part of the sale of a separate $5.7 billion loan portfolio to real estate investment company Kennedy Wilson Holdings Inc. That transaction followed a March deal that brought it $1.4 billion from a financing facility provided by Apollo Global Management-owned investment firm Atlas SP Partners.
Bloomberg reported in April that PacWest was considering the sale of its lender finance arm and loans associated with the platform.
Read More: PacWest Bosses Were Trying to Start Over. Then SVB Failed
PacWest hasn’t been the only firm to turn to asset managers to help shrink the balance sheet amid deposit outflows. In May, Atlas SP, Angelo Gordon and Varde Partners — in partnership with Pagaya Technologies — bought a pool of consumer loans from a US credit union to raise liquidity amid banking-sector turmoil.
PacWest shares rose 4.2% at 10:36 a.m. in New York, paring this year’s decline to 67%.
The portfolio purchased by Ares has an aggregate commitment amount of $3.54 billion, including an outstanding principal balance of $2.21 billion, PacWest said in the filing.
“Every bank we are talking to is looking at their assets,” Holsinger said. “They don’t want to be burned by asset-liability mismatch. The second wave, which will be years, is going to be shedding non-core businesses and doing capital relief trades.”
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