In the world of business, cash is king. And when a bank finds itself short on deposits, it can be a tricky situation. But PacWest Bancorp has found a solution: partnering with Atlas Merchant Capital LLC for a $4 billion cash injection. It’s an audacious move that could pay off big time – but there are risks involved. So buckle up and read on to find out more about this bold banking move!
PacWest Bancorp
Atlas Capital Markets, LLC (“Atlas”) is acting as lead financial advisor to PacWest Bancorp (“PacWest”) (NASDAQ: PACW) in connection with its $1.0 billion common stock offering. The transaction is expected to close on or about August 8, 2019, subject to customary closing conditions.
In connection with the transaction, PacWest has entered into an underwriting agreement with Atlas Capital Markets, LLC and JMP Securities LLC, as joint book-running managers, and Keefe, Bruyette & Woods, a Stifel Company and Piper Jaffray & Co., as co-managers.
Founded in 1995 and headquartered in Los Angeles, PacWest is the holding company for Pacific Western Bank, one of the largest community banks in California with approximately $20 billion in assets. Pacific Western Bank provides banking products and services through over 130 branches across California.
Atlas Capital Markets
Atlas Capital Markets is a leading global investment firm that specializes in providing capital markets and advisory services to companies and governments. The firm has a long history of success in raising capital for its clients, and its team of experienced professionals has a deep understanding of the financial markets. Atlas Capital Markets is committed to helping its clients achieve their financial goals and provides a full range of services, including investment banking, capital markets, and advisory services.
Deposit shortfall
In May 2019, PacWest Bancorp announced that it would be selling $1 billion in new shares to private equity firm Atlas Capital Group. The move came after the bank experienced a deposit shortfall of $632 million in the first quarter of 2019.
The deposit shortfall was caused by a number of factors, including:
– High levels of withdrawals by institutional investors
– A decrease in customer deposits
– An increase in loan loss provisions
To offset the deposit shortfall, PacWest took a number of actions, including:
– Selling $1 billion in new shares to Atlas Capital Group
– Reducing its dividend payout by 50%
– suspending its share repurchase program
$4bn cash injection
In a bid to shore up its balance sheet, PacWest Bancorp is selling $4 billion of new shares to Atlas Capital Group. The move comes after the Los Angeles-based bank suffered a deposit shortfall in the wake of the coronavirus pandemic.
The cash infusion will bolster PacWest’s liquidity position and help it navigate the challenges posed by the pandemic. It will also enable the bank to continue supporting its customers and communities during this difficult time.
Pros and cons of PacWest’s decision
When it comes to the question of whether or not PacWest made the right decision in turning to Atlas for a $1 billion cash injection after a deposit shortfall, there are pros and cons to consider.
On the one hand, some may argue that PacWest made a smart move in choosing to partner with Atlas. After all, Atlas is one of the largest private equity firms in the world and has a strong track record of investing in and growing companies. In addition, by partnering with Atlas, PacWest will be able to tap into its vast network of resources and contacts.
On the other hand, some may say that PacWest’s decision could put it at risk of losing its independence. With Atlas holding a significant minority stake in the company, there is a chance that Atlas could eventually take control of PacWest. In addition, as part of the deal, PacWest will have to give up a seat on its board of directors to an Atlas representative.
Ultimately, only time will tell whether or not PacWest’s decision to turn to Atlas for financial assistance was the right one.
What this means for the future of PacWest
In the wake of the global pandemic, many banks are struggling to stay afloat. PacWest is no exception. The bank has been relying on Atlas for a $bn cash injection to cover a deposit shortfall.
This move highlights the importance of digital banking and fintech solutions in the current climate. It also points to a future where traditional banks will have to increasingly rely on such solutions to compete with nimbler, more agile fintech startups.
Conclusion
PacWest’s $4 billion cash injection through Atlas is a great move for the bank and will help them to stay well-capitalized in this difficult financial period. This investment should allow the bank to remain competitive, while also allowing them to pursue new growth opportunities in an increasingly complex banking landscape. As more banks look towards alternative sources of funding, PacWest’s decision may serve as an example of how other organizations can access necessary funds without requiring a large-scale loan from traditional investors.
