Californian bank PacWest has reached a deal to sell a $2.6bn portfolio of loans to real estate investment group Kennedy Wilson, just weeks after it said it was looking at narrowing its focus to its core community banking business.
The lender said in a filing on Monday the sale of 74 loans was “consistent with the previously announced strategy of PacWest Bancorp to pursue strategic assets sales”. The deal could be expanded to include another six loans worth $363mn.
PacWest has been under pressure since Silicon Valley Bank collapsed in mid-March, prompting depositors to pull money from other mid-sized regional banks, and has suffered sharp stock price declines. Its shares, which have shed three quarters of their value since the start of the year, rose 3.8 per cent in pre-market trading.
The bank announced this month that it had designated a $2.7bn lender finance portfolio as available for sale. At that time deposits totalled $28bn, with just 25 per cent of them in accounts too large to be covered by federal deposit insurance.
Beverly Hills-based PacWest lost $5bn in deposits in the first quarter amid the broader market concern over SVB, but said in May it had not seen out-of-the-ordinary deposit flows around the late April failure and takeover of First Republic.
Under the terms of the deal, Kennedy Wilson has placed $20mn in escrow but it is refundable until the firm completes due diligence. The transaction is scheduled to close in tranches over the next few months.
Kennedy Wilson focuses on multi-family and office properties in the western US, the UK and Ireland. It is also headquartered in Beverly Hills. Its investment management business runs $6bn in fee-bearing capital and it has purchased or originated more than $8bn in debt since 2010. Investor Todd Boehly, who co-owns the Chelsea football team and the Los Angeles Dodgers baseball team, sits on its board.
PacWest and Kennedy Wilson did not immediately respond to emails seeking comment. Kennedy Wilson’s shares rose 1.2 per cent in pre-market trading.
PacWest reported a net loss of $1.21bn in the first quarter. It also reported $860mn in unrealised losses in its securities portfolio. It had instructed investment bank Piper Sandler to help it explore strategic options, the Financial Times reported this month. It had also shored up its access to cash in April with a $1.4bn lending facility from Apollo-backed investment group Atlas Partners.