PacWest Bancorp said on Monday it was selling a $3.54 billion lender finance loan portfolio to Ares Management (NYSE:ARES), in an attempt to boost liquidity at the U.S. regional lender, sending its shares up 7% in premarket trading.
A relentless rate hike campaign by the Federal Reserve has raised risks of more loans turning bad and banks are responding by reducing their lending exposure to potentially beleaguered sectors such as commercial real estate.
Since late May, Los Angeles-based PacWest has also sold its real estate lending unit and a huge chunk of its real estate loans.
Through sale of such loans, some regional banks in the United States are trying to shore up capital and build investor confidence after a 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 fetched $2.01 billion in proceeds from sale of the first part of its lender finance loan portfolio, it said in a filing with the U.S. Securities and Exchange Commission.
Its lender finance arm provided loans to small business lenders, commercial real estate lenders and consumer lenders.
As banks rush to sell, private equity firms and other asset managers are taking advantage of the situation. Blackstone (NYSE:BX) in April said the crisis offered a “golden moment” to expand its credit business.
Ares said its alternative credit arm bought PacWest’s loans, with financing from Barclays (LON:BARC).