This week in the premium service of The Institutional Risk Analyst, we take a look at the merger of Western Alliance Bancorporation (NYSE:WAL) with AmeriHomeMortgage (AH). This public report is an example of the content available to subscribers to The IRA premium service.
WAL is the $33 billion asset parent of Western Alliance Bank, a state-chartered depository based in Phoenix, AZ. AH is controlled by insurance companies owned by Athene Holding Ltd. (NYSE: ATH), and funds managed by Apollo Global Management, Inc (NYSE:APO).
WAL closed at $88 on Friday, an equity market valuation of 2.6x book value and a 17x trailing price to earnings. WAL closed below 50bp in credit default swaps on Friday, roughly in line with the large money centers such as Citigroup (NYSE:C) and Bank of America (NYSE:BAC), with a beta of just 1.6x the average market volatility.
No surprise then that both Moody’s and Kroll Bond Rating Agency reaffirmed the long- and short-term ratings for WAL immediately after the transaction was announced. Indeed, KBRA put AH on watch for a rating upgrade to reflect the superior credit of the bank holding company. KBRA noted last week:
“AmeriHome’s Issuer rating was most recently affirmed on October 26, 2020 in an action that was supported by the company’s consistent multiyear operating performance, and reasonable pro forma leverage, following a partially debt financed special dividend to its owners – insurance companies owned by Athene Holding Ltd… and funds managed by Apollo Global Management – as well as the company’s bolstered liquidity. AmeriHome’s credit profile has benefitted from a highly qualified management team, the majority of which gained some of their most valuable experience during and following the Global Financial Crisis (GFC).”