California bank PacWest has struck a deal to sell more than $2 billion in loans to real estate investment group Kennedy-Wilson at a discount, just weeks after it said it was considering narrowing its focus to its core community banking business.
Kennedy-Wilson said in a Monday filing that it will pay $2.4 billion on 74 variable-rate loans with a total principal balance of $2.6 billion.
In a separate filing, PacWest said the transaction is “consistent with PacWest Bancorp’s previously announced strategic asset sales strategy.” The deal could be expanded to include six additional loans with a balance of $363 million.
PacWest has been under pressure since the collapse of Silicon Valley Bank in mid-March, prompting depositors to pull money from other mid-sized regional banks and a sharp drop in stock prices. Its shares, which have lost three-quarters of their value since the start of the year, surged 14% on the news.
The bank announced this month that it had earmarked a $2.7 billion portfolio of loan facilities for sale. At the time, deposits totaled $28 billion, and only 25 percent of those accounts were too large for federal deposit insurance.
Beverly Hills-based PacWest lost $5 billion in deposits in the first quarter due to broader market concerns about SVB, but said in May that it hadn’t looked at First Bank before and after its collapse and receivership in late April. To the republic of unusual deposit flows.
Under the terms of the deal, Kennedy-Wilson has placed $20 million in escrow, but the funds are refundable until the company completes due diligence and plans to hire PacWest employees to manage the loan portfolio. The transaction is planned to be completed in batches over the next few months.
Kennedy-Wilson focuses on multifamily and office properties in the western United States, United Kingdom and Ireland. It is also headquartered in Beverly Hills. Its investment management business operates $6 billion in fee-based capital and has purchased or issued more than $8 billion in debt since 2010. Investor Todd Boehly, co-owner of the Chelsea football team and the Los Angeles Dodgers baseball team, is sitting on its board.
PacWest did not immediately respond to an email seeking comment. Shares of Kennedy-Wilson were up 3.5% in midday trading.
PacWest posted a net loss of $1.21 billion in the first quarter. It also reported an unrealized loss of $860 million on its portfolio of securities. It has directed investment bank Piper Sandler to help it explore strategic options, the Financial Times reported this month. It also bolstered its access to cash in April with a $1.4 billion loan from Apollo-backed investment group Atlas Partners.