SVB Financial Goes Bankrupt, Buying Time to Repay Creditors (1)

Silicon Valley Bank’s former parent company filed for bankruptcy a week after a run on deposits prompted regulators to seize its banking unit.

SVB Financial Group listed assets and liabilities of as much as $10 billion each in a Chapter 11 petition filed in New York. Broker-dealer SVB Securities and venture capital arm SVB Capital aren’t included in the filing, according to a statement.

Watch: SVB Financial Group files for bankruptcy.

Source: Bloomberg

Because Silicon Valley Bank was a California-chartered commercial bank and part of the Federal Reserve system, it is not eligible for bankruptcy and landed in Federal Deposit Insurance Corp. receivership instead. Its former parent, however, is eligible to file in order to protect its remaining assets and work on repaying creditors, including bondholders.

Following the receivership, SVB Financial is no longer affiliated with Silicon Valley Bank NA or its private banking and wealth management business, SVB Private, the company said.

SVB “believes” it has about $2.2 billion of liquidity and counts its equity in SVB Capital and SVB Securities among its assets, according to the statement. It owes bondholders about $3.3 billion.

Centerview Partners is helping SVB evaluate strategic alternatives for SVB Capital and SVB Securities. The process has garnered significant interest, and any sale would require bankruptcy court approval, according to the statement.

“SVB Financial Group will continue to work cooperatively with Silicon Valley Bridge Bank,” William Kosturos, chief restructuring officer for SVB Financial Group, said in the statement. “We are committed to finding practical solutions to maximize the recoverable value for stakeholders of both entities.”

Bank Collapse

Santa Clara, California-based SVB was the biggest bank to fail in more than a decade, with about $209 billion in total assets as of the end of last year, the FDIC said. It’s also the second largest bank to fall under the agency’s receivership, behind only Washington Mutual Inc., which imploded in 2008.

Read more: Silicon Valley Bank Collapses in Biggest Failure Since 2008

Concern in tech circles swelled last week after Peter Thiel’s Founders Fund and other high-profile venture capital firms advised their portfolio companies to pull money from the bank. That advice came a day after the bank’s parent company announced it would try to raise more than $2 billion following a significant loss on its portfolio.

Silicon Valley Bank was founded in 1983 over a poker game between Bill Biggerstaff and Robert Medearis, according to a statement from the bank’s 20th anniversary. The firm specialized in providing financial services to tech startups.

SVB Financial Corp. held about $2.3 billion of cash, $500 million of investment securities and $475 million of other assets as of Dec. 31, according to regulatory filings.

SVB bonds moved higher on Friday morning. The company’s 2.1% notes due 2028 rose about 6.5 cents on the dollar to 64.5 cents as of 8:50 a.m. in New York, according to Trace data.

The case is SVB Financial Group, 23-10367, U.S. Bankruptcy Court for the Southern District of New York.

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To contact the reporters on this story:
Amelia Pollard in New York at apollard18@bloomberg.net;
Steven Church in Wilmington, Delaware at schurch3@bloomberg.net

To contact the editors responsible for this story:
Claire Boston at cboston6@bloomberg.net

Jeremy Hill

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