(Bloomberg) – PacWest Bancorp has issued a $3.5 billion asset-backed loan portfolio to Ares Management Corp. sold, the latest example of a bank looking to improve liquidity by selling assets to private investment firms.
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Ares Alternative Credit Funds bought the specialty finance portfolio, which was backed by assets including consumer loans, mortgages and timeshares, 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 cash proceeds of $2 billion before transaction costs.
Private equity and private credit shops are among the few companies that have the capital and desire to buy significant amounts of consumer goods from larger banks. Other lenders are struggling with their own liquidity problems, and some are already integrating recent purchases.
“Those opportunities are really only available to some of the largest wealth managers,” said Joel Holsinger, co-head of alternative lending at Ares, in an interview. “You have to be able to speak for billions.”
Still, some of their attempts by alternative wealth managers to take advantage of the industry turmoil to buy portions of banks or asset pools have failed. Instead, US regulators have chosen other banks to deal with failed lenders. While efforts by private investment firms to participate in the regulatory sales of Silicon Valley Bank and Signature Bank failed, bids for assets from still-operating lenders proved more successful.
“This is the first inning of activity,” Holsinger said. “What we’ve bought in this first phase — what the banks are selling — are top-quality, short-dated, floating-rate assets.”
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PacWest, a Beverly Hills-based regional bank, is strengthening its finances after several regional lenders were hit by a deposit storm earlier this year that led to the collapse of three California-based banks and one in New York.
Earlier this month, the company completed the first part of the sale of a $5.7 billion separate loan portfolio to real estate investment firm Kennedy Wilson Holdings Inc. This transaction followed a deal in March that raised the company $1.4 billion from a financing facility provided by Apollo Global Management. own investment company Atlas SP Partners.
Bloomberg reported in April that PacWest is considering selling its lender financing division and the loans associated with the platform.
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PacWest wasn’t the only company to turn to money managers to help shrink its balance sheet in the face of 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 provide liquidity amid the turmoil in the banking sector.
PacWest shares were up 4.2% as of 10:36 am in New York, paring this year’s decline to 67%.
The portfolio acquired from Ares has total liabilities of $3.54 billion, including $2.21 billion of outstanding principal, PacWest said in the filing.
“Every bank we speak to does an asset audit,” Holsinger said. “You don’t want to be burned by the mismatch between assets and liabilities. The second wave, which will last for years, will result in non-core businesses being divested and capital relief deals being undertaken.”
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