A private equity firm run by a former top U.S. banking regulator has agreed to invest $100 million in PacWest Bancorp, giving it a 12 percent stake in the Southern California lender.
The investment by
CapGen will buy newly-issued stock of PacWest at $26 per share, a 14.6 percent premium to PacWest’s Friday closing price. It will make the investment through CapGen Capital Advisers LLC, which will register as a bank holding company.
PacWest lost $747.2 million in the first half of 2008, hurt by a large goodwill write-off and an increase in soured commercial real estate and residential construction loans.
Excluding items, first-half operating profit fell 71 percent to $15.1 million, or 55 cents per share. The San Diego-based parent of Pacific Western Bank has $4.34 billion of assets and operates 60 branches. It was known until May as First Community Bancorp.
“We view this as extremely positive,” wrote James Abbott, an analyst at Friedman, Billings, Ramsey & Co. “This capital puts PacWest squarely in the driver’s seat to bid on distressed institutions.” He rates PacWest “outperform.”
PacWest said its Tier-1 capital ratio, which measures its ability to cover losses, was 10.89 percent as of June 30, and would have been 13.17 percent including the investment. Regulators say 6 percent reflects a well-capitalized bank.
“This investment will deliver value over the long term to CapGen, PacWest, its stockholders and employees by, among other things, enabling PacWest to be better positioned to capitalize on future growth opportunities,” said Ludwig in a statement. He was not immediately available for further comment.
The transaction requires regulatory approval and is expected to close in the fourth quarter.
John Rose, a CapGen principal, would join PacWest’s board, and CapGen would have the right in future equity offerings to maintain its percentage stake.
Some experts expect more private equity firms to pursue minority stakes in banks, which can be accomplished without dramatic regulatory changes, rather than full buyouts.
(By Jonathan Stempel. Additional reporting by Paritosh Bansal and Megan Davies; Editing by Brian Moss and Dave Zimmerman)