PacWest sold $2.6B of loans for $2.4B — then sold itself

PacWest Bancorp, the Los Angeles lender built around real estate lending, was caught in the March 2023 regional-bank panic that began on 8 March. It lost 16.9 per cent of its total deposit base at the outset of the crisis, and by May its market value had fallen by three-quarters. The construction-loan book that had driven its growth now strained its funding: the loans were financed by deposits and borrowings the market doubted the bank could keep.

On 22 May 2023 PacWest agreed to sell the portfolio — 74 real estate construction loans with an outstanding balance of $2.6 billion — to property firm Kennedy-Wilson for $2.4 billion, a discount of about $200 million. Kennedy-Wilson also agreed to assume six more construction loans with roughly $363 million of balance, subject to clearances. The bank said the sale would cut risk-weighted assets, modestly improve its regulatory capital ratios and remove the need to fund that book with extensive deposits or borrowings. Shares rose 15 per cent on the announcement.

The discount bought time but not independence. On 30 November 2023 PacWest merged into Banc of California, with affiliates of Warburg Pincus and Centerbridge Partners injecting $400 million of new equity and about $1.9 billion of assets sold to reposition the balance sheet. The combined bank — run by Banc of California chief executive Jared Wolff, with more than 70 branches — became the third-largest bank headquartered in California. The acquirer kept the name; PacWest's shareholders became minority holders in the survivor.