PacWest Bank sells $3.5bn lender finance portfolio to Ares

September 2023 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

September 2023 Issue

In a move to strengthen its balance sheet after it was rocked by the US regional banking crisis, bank holding company Pacific Western (PacWest) Bank has sold its specialty finance loan portfolio to global alternative investment manager Ares Management Corporation in a transaction valued at $3.5bn.

PacWest, along with other regional lenders, has turned to the Federal Reserve’s Bank Term Funding Program to buoy its liquidity in the wake of the crisis that unfolded in March 2023 – a move which, although helping the company to stay afloat, has not allowed it to replenish the capital it requires to engage in long-term lending.

As a result of the regional banking crisis, PacWest turned to asset sales and sold its real estate lending unit and much of its real estate loan book in May.

Headquartered in Los Angeles, California, with an executive office in Denver, Colorado, and one wholly-owned banking subsidiary, PacWest is a relationship-based community bank focused on providing business banking and treasury management services to small, middle market and venture-backed businesses.

Its specialty finance loan portfolio, which consists of high quality, senior secured, asset-backed loans, was originated by PacWest’s lender finance unit and is backed by assets across a variety of industries and asset classes including consumer loans, small business loans, timeshare receivables, auto loans, asset manager and fund finance loans, residential real estate loans and commercial real estate loans.

“We are excited to broaden and enhance our existing Alternative Credit portfolio through this strategic acquisition of a high quality portfolio of asset-backed loans,” said Jeffrey Kramer, partner and portfolio manager of alternative credit at Ares. “Our longstanding relationship with PacWest and our team’s ability to underwrite across numerous asset classes and efficiently complete the transaction positioned Ares to be the partner of choice.”

A leading global alternative investment manager offering clients complementary primary and secondary investment solutions across the credit, private equity, real estate and infrastructure asset classes, Ares Management Corporation provides flexible capital to support businesses and create value for its stakeholders and within its communities.

“Our team is an established leader in providing creative and flexible solutions to asset-focused investment opportunities,” said Joel Holsinger, partner and co-head of alternative credit at Ares. “Our scale, coupled with one of the more flexible mandates in the private credit market today, makes Ares Alternative Credit an ideal partner to the banking community as they optimise their balance sheets and strengthen their financial position.”

As of 31 March 2023, Ares Management Corporation’s global platform had approximately $360bn of assets under management, with over 2600 employees operating across North America, Europe, Asia Pacific and the Middle East.

Providing exclusive financing to Ares on the transaction is Barclays, with Stephens serving as exclusive financial adviser to PacWest Bancorp.

“We are pleased to have worked together with Ares to complete this strategic transaction,” concluded Paul Taylor, president and chief executive of PacWest Bancorp. “This transaction will improve our liquidity and capital as we continue to implement our announced strategy to return our focus to relationship-based community banking.”

Fraser Tennant