PacWest Bancorp, one of the US regional banks that was in trouble earlier this month, steadied itself by striking an agreement to sell a $2.6 billion portfolio of 74 real estate construction loans to boost liquidity.
In a statement, the LA-based lender said Kennedy-Wilson Holdings Inc will buy the loans at a discounted price of about $2.4 billion. The buyer will also assume all future funding obligations of about $2.7 billion.
In addition, PacWest said it will also sell an additional six real estate construction loans with an average principal balance of around $363 million to Kennedy-Wilson.
Investors reacted to the news, sending PacWest shares nearly 9% higher to $6.25 in the pre-market trading session.
The sale of the loans is subject to standard closing conditions, including Kennedy Wilson's completion of its due diligence.
In connection with the deal, Kennedy Wilson will deposit $20 million into a third-party escrow account that will be refundable back to Kennedy Wilson until it waives due diligence in line with the terms of the agreement.
PacWest Bancorp is a subsidiary of Pacific Western Bank. The lender had signaled in May that it was in negotiations with potential partners and investors about strategic options.
The Los Angeles-based lender earlier this month said its deposits declined and it had posted more collateral to the US Federal Reserve as risk management and to boost its liquidity.
PacWest is one of several US regional lenders whose shares have been hammered by investor concerns over the health of the banking sector following the collapse of three banks since March, the latest being the First Republic Bank (NYSE:FRC). After a six-week-long free fall, San Francisco-based First Republic Bank (NYSE:FRC) was seized by the federal government and sold to JPMorgan Chase.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
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