PacWest Bancorp announced on Monday that it would sell a $3.54 billion lender finance loan portfolio to asset management firm Ares Management in an effort to increase liquidity at the US regional lender, sending its shares up nearly 5%.
The Federal Reserve’s continuous rate hike campaign has increased the possibility of additional loans going bad, and banks are responding by lowering their lending exposure to potentially troubled sectors such as commercial real estate.
PacWest, situated in Los Angeles, has also sold its real estate lending unit and a significant portion of its real estate loans since late May.
Some regional banks in the United States are selling such loans to shore up capital and build investor trust following the recent banking crisis.
Shares of PacWest have gained nearly 5% over the past month.
“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,” PacWest Chief Executive Officer Paul Taylor said in a statement.
PacWest reported $2.01 billion in proceeds from the sale of the first portion of its lender finance loan portfolio to the Securities and Exchange Commission.
Small company lenders, commercial real estate lenders, and consumer lenders received loans from its lender finance division.
Private equity firms and other asset managers are taking advantage of the situation as banks hurry to sell. In April, Blackstone claimed the crisis provided a “golden moment” to expand its lending business.
Ares said its alternative credit unit purchased PacWest’s loans with Barclays funding.