BANC - JPMorgan Chase said to buy $1.8B of mortgages in PACW-BANC deal

2023-07-26 15:04:30 ET

JPMorgan Chase ( NYSE: JPM ) has agreed to acquire $1.8B of single-family residential loans at a discount, people familiar with the matter told Bloomberg on Wednesday, to facilitate PacWest Bancorp's ( NASDAQ: PACW ) sale to Banc of California ( NYSE: BANC ).

Banc of California ( BANC ) and troubled lender PacWest ( PACW ) announced Tuesday an all-stock merger with a $400M equity raise from Warburg Pincus and Centerbridge Partners to help cover markdowns on asset sales. The combined company is expected to have about $36.1B in assets.

In a Tuesday presentation, Banc of California ( BANC ) said it had struck a "contingent forward asset sale agreement" for its residential mortgage portfolio without naming the buyer, Bloomberg reported. BANC and PACW plan to dispose of about $7B of loans, mortgage bonds and other assets to pay down costly borrowings.

That amount was said to yield less than 4%, and the banks will use the dispositions and cash on hand to pay off $13B worth of borrowings that cost 5%. The assets that are expected to be sold will be hedged with a $3.5B interest-rate derivative.

It's unclear whether JPMorgan ( JPM ) plans to retain the loans or sell them, the article said, noting that neither JPMorgan nor Banc of California ( BANC ) immediately responded to requests for comment.

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