CapitalSource

CapitalSource is a United States commercial lending brand focused on providing senior debt and related financial services to middle-market businesses. Founded in 2000 by John Delaney and Jason Fish, the company began with more than $500 million in initial capitalization, an unusually large private capitalization for a finance company at the time. Its lending model emphasized loans originated, underwritten, and managed on the company’s own balance sheet rather than through a primarily securitized or syndicated structure. The company’s principal lending categories included first-mortgage loans, cash-flow loans, and asset-based loans. Its target sectors included technology, real estate, healthcare, security services, small businesses, golf-related finance, and equipment leasing. CapitalSource’s typical senior debt facilities ranged from approximately $5 million to $100 million and were intended for companies requiring growth capital, acquisition financing, refinancing, or other forms of structured commercial credit. CapitalSource became a public company in 2003, listing on the New York Stock Exchange under the symbol CSE. In 2006 it converted to a real estate investment trust, a structure that offered tax advantages and was intended to support competitiveness in a liquid credit market. The company later revoked its REIT status in 2009 and returned to operating as a C corporation. During the late 2000s and early 2010s, CapitalSource attracted attention through several real-estate lending situations. It exited a controversial hotel-related project involving developer Andre Balazs and rapper Jay-Z by selling the property note to another developer at a loss. In 2010, CapitalSource Bank foreclosed on the Manhattan Blue condominium project after the development failed to sell enough units to meet its payment obligations. The project had reportedly attracted interest from actor Leonardo DiCaprio, although that interest did not resolve the financing difficulties. CapitalSource moved its headquarters to Los Angeles in early 2012. The company also became the subject of criticism in reporting about Aeon Financial, a company that purchased tax liens and was accused of imposing excessive charges on homeowners seeking to avoid foreclosure. CapitalSource was described as a major lender to Aeon Financial; the reporting concerned the conduct of the borrower and the broader effects of tax-lien finance, rather than establishing that CapitalSource itself had been accused or found liable for those practices. PacWest Bancorp agreed to acquire CapitalSource in 2013 for approximately $2.29 billion. Regulatory approval was completed on April 1, 2014, and CapitalSource’s CSE shares stopped trading after the market closed on April 7, 2014. Shareholders received a combination of cash and PacWest shares. In April 2014, CapitalSource was combined with Pacific Western Bank, creating a larger California commercial banking platform. The CapitalSource name continued as a commercial lending division and brand of Pacific Western Bank rather than as an independently traded public company. The brand has also been associated with community-development initiatives. CapitalSource Bank played a central role in establishing the Elder Financial Protection Network, and the California State Legislature recognized the bank for supporting that effort. In 2010, the bank received a Bank Enterprise Award from the U.S. Treasury Department’s Community Development Financial Institutions Fund for investment in low-income and economically distressed communities in California.

CapitalSource was established in 2000 by John Delaney and Jason Fish with more than $500 million in initial capital. The founders created a finance company aimed at lending directly to middle-market businesses, with an emphasis on internally originated and managed loans. Its strategy differed from that of institutions relying mainly on loan syndication or off-balance-sheet vehicles: CapitalSource generally retained loans on its own balance sheet and managed underwriting and servicing internally. The company developed a sector-oriented commercial lending portfolio. Its focus areas included technology, real estate, healthcare, security, small business, golf finance, and equipment leasing. The core credit products were first-mortgage loans secured by real estate, cash-flow loans supported by operating performance, and asset-based loans backed by business assets. Loan sizes generally fell between $5 million and $100 million, placing the company between conventional small-business banking and larger corporate or institutional finance. CapitalSource went public in 2003 and its shares traded on the New York Stock Exchange under the ticker CSE. In 2006, the company converted to a REIT. The change was designed to provide tax benefits and help the business compete in a highly liquid credit market. The REIT structure did not become permanent: in 2009, CapitalSource revoked its REIT status and returned to the C-corporation form it had used before the conversion. The company’s lending activities brought it into several high-profile real-estate situations. CapitalSource was briefly connected to a hotel project involving Andre Balazs and Jay-Z, but withdrew by selling the property note to another developer at a loss. In 2010, CapitalSource Bank foreclosed on the Manhattan Blue condominium project in Manhattan. The development had attracted early interest from Leonardo DiCaprio, but sales were insufficient for the developers to maintain payments to the lender. In early 2012, CapitalSource moved its headquarters to Los Angeles. Around the same period, its lending relationship with Aeon Financial became a subject of critical reporting. The Washington Post described Aeon as a secretive tax-lien purchaser that aggressively acquired liens and charged homeowners what critics characterized as excessive or unreasonable amounts to avoid foreclosure. CapitalSource was identified as a major lender to Aeon. This episode is relevant to the history of the brand because it raised questions about lender exposure to controversial borrowers, although the available reference does not establish that CapitalSource itself was responsible for Aeon’s collection practices. PacWest Bancorp agreed to acquire CapitalSource in 2013 for approximately $2.29 billion. The transaction received final regulatory approval on April 1, 2014. CapitalSource’s NYSE-listed shares ceased trading at the close of business on April 7, 2014, and shareholders received a combination of cash and PacWest shares based on the merger terms. In April 2014, CapitalSource and Pacific Western Bank were merged into a larger California commercial banking platform. CapitalSource ceased to be an independent public company but continued as a lending division and commercial-finance brand of Pacific Western Bank. CapitalSource Bank also participated in community-oriented initiatives. It helped establish the Elder Financial Protection Network, an organization focused on protecting older people from financial exploitation. The California State Legislature issued the bank a certificate recognizing its role in launching and maintaining the network. In 2010, the bank received a Bank Enterprise Award from the U.S. Treasury’s Community Development Financial Institutions Fund for investments in low-income and economically distressed California communities.

• 2014

  Merger completed

  [1]CapitalSourceen.wikipedia.org

  Regulatory approval was completed in April, CapitalSource shares stopped trading, and the business was combined with Pacific Western Bank.

• 2013

  PacWest Bancorp announces acquisition

  [1]CapitalSourceen.wikipedia.org

  PacWest Bancorp agreed to acquire CapitalSource in a transaction valued at approximately $2.29 billion.

• 2012

  Headquarters moves to Los Angeles

  [1]CapitalSourceen.wikipedia.org

  CapitalSource relocated its headquarters to Los Angeles.

• 2010

  Bank Enterprise Award

  [1]CapitalSourceen.wikipedia.org

  CapitalSource Bank received a Bank Enterprise Award from the U.S. Treasury’s Community Development Financial Institutions Fund for community investment in California.

• 2009

  Return to C-corporation structure

  [1]CapitalSourceen.wikipedia.org

  CapitalSource revoked its REIT status and resumed operating as a C corporation.

• 2006

  Conversion to REIT

  [1]CapitalSourceen.wikipedia.org

  The company completed its conversion to a real estate investment trust.

• 2003

  Initial public offering

  [1]CapitalSourceen.wikipedia.org

  CapitalSource completed an IPO and began trading on the New York Stock Exchange under CSE.

• 2000

  CapitalSource is founded

  [1]CapitalSourceen.wikipedia.org

  John Delaney and Jason Fish founded CapitalSource with more than $500 million in initial capitalization.

On-balance-sheet commercial lender serving middle-market companies with sector-focused senior debt and structured financing.

• Commercial lending · 2000

  Senior debt loans

  CapitalSource’s principal offering was senior debt financing for middle-market companies. Facilities generally ranged from approximately $5 million to $100 million and could support business growth, refinancing, acquisitions, or other corporate funding needs. The company focused on originating, underwriting, and managing these loans internally.

• Commercial real-estate finance

  First-mortgage loans

  First-mortgage lending formed one of CapitalSource’s major credit categories. These loans were secured by real-estate interests and were used in commercial property and other asset-backed financing situations.

• Corporate finance

  Cash-flow loans

  Cash-flow loans were underwritten primarily against a borrower’s operating performance and expected ability to service debt. They were part of CapitalSource’s broader middle-market lending platform.

• Secured commercial lending

  Asset-based loans

  Asset-based loans were secured by business assets and represented another core CapitalSource lending category. The approach allowed the lender to finance companies whose borrowing capacity depended substantially on collateral rather than only on cash flow.

• 2013

  Aeon Financial tax-lien lending controversy

  The Washington Post identified CapitalSource as a major lender to Aeon Financial, a tax-lien purchaser criticized for aggressively pursuing homeowners and imposing unusually high charges. The available material describes a controversial lending relationship and does not establish that CapitalSource itself engaged in the alleged homeowner practices.

  Source

Read more

• 2013

  Agree to acquisition by PacWest BancorpM&A

  Background

  PacWest Bancorp sought to acquire CapitalSource and combine its commercial lending platform with Pacific Western Bank.

  Action taken

  The parties agreed to an approximately $2.29 billion transaction involving cash and PacWest shares for CapitalSource shareholders.

  Aftermath

  The merger received regulatory approval in April 2014, CapitalSource ceased independent stock-market trading, and its business continued within Pacific Western Bank.

  Acquisition value. $2.29 billion (2013 announcement)

  Source

• 2009

  Revoke REIT statusStrategy

  Background

  The company’s REIT period ended after less than four years.

  Action taken

  CapitalSource revoked its REIT election and resumed its prior C-corporation structure.

  Aftermath

  The company continued as a commercial lender before its acquisition by PacWest Bancorp.

  Source

• 2006

  Convert to REIT structureStrategy

  Background

  CapitalSource sought a structure that could provide tax benefits and help it compete in a liquid credit market.

  Action taken

  The company completed its conversion into a real estate investment trust.

  Aftermath

  CapitalSource later abandoned the REIT structure and returned to C-corporation status in 2009.

  Source

1. 1CapitalSourceen.wikipedia.org