D.A. Davidson on Monday upgraded PacWest Bancorp
PACW,
to buy from neutral to bring it up to the same rating as upcoming acquirer, Banc of California
BANC,
as announced last week. “We think that transaction is beneficial to shareholders of both companies, and accelerates the recovery of value for PACW shareholders in the wake of the March bank liquidity crisis,” D.A. Davidson analyst Gary Tenner said in a research note. He also raised PacWest’s price target to $14 a share from $8 a share. “There is minimal risk of the transaction not closing, as regulators should welcome the capital infusion and post-deal stability,” Tenner said. Also on Monday, Fitch upgraded its ratings watch on PacWest to “evolving” from “negative” following the merger announcement with Banc of California. Fitch reiterated its BB+ debt rating, its highest speculative grade, or “junk” rating, for PacWest debt. Fitch said it expects to resolve the rating watch on PacWest upon close of the pending merger with Banc of California either in the fourth quarter or the first quarter of 2024. “The proposed merger with BANC will likely alleviate uncertainty and headline risk around PACW’s liquidity and earnings profiles, and will accelerate execution on its balance sheet restructuring plan,” Fitch said. PacWest stock was down 1.4% on Monday.
