SVB Parent Company Files For Bankruptcy Amid Bank Turmoil

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by Tom Ozimek at

The parent company of the collapsed Silicon Valley Bank (SVB) has filed for bankruptcy.

SVB Financial Group, which is no longer affiliated with SVB after the failed bank was taken over by the Federal Deposit Insurance Corporation (FDIC), said in a press release Friday that it has filed a petition for a court-supervised reorganization under Chapter 11.

The aim of filing for bankruptcy protection is to “preserve value” as it seeks buyers for its assets, SVB Financial Group said.

“The Chapter 11 process will allow SVB Financial Group to preserve value as it evaluates strategic alternatives for its prized businesses and assets, especially SVB Capital and SVB Securities,” William Kosturos, Chief Restructuring Officer for SVB Financial Group, said in a statement.

SVB Financial Group said it has about $2.2 billion of liquidity and other assets for which it’s “exploring strategic alternatives,” understood to mean some type of acquisition.

Funded debt for SVB Financial Group is about $3.3 billion in aggregate principal amount of unsecured notes. SVB Financial Group also has $3.7 billion of preferred equity outstanding.

Not included in the bankruptcy filing are SVB Securities and SVB Capital’s funds and general partner entities, which continue to operate normally.

The move comes several days after SVB Financial Group said it was exploring “strategic alternatives” for its operations as Silicon Valley Bank undergoes an orderly wind-down known as “resolution” under the jurisdiction of the FDIC and the Federal Reserve.

As part of the resolution process, SVB is being run by a newly established bridge bank called the Silicon Valley Bridge Bank, which is open and is “conducting business as usual.”

Silicon Valley Bridge Bank is also not part of the Chapter 11 bankruptcy filing.

“The number one thing you can do to support the future of this institution is to help us rebuild our deposit base, both by leaving deposits with Silicon Valley Bridge Bank and transferring back deposits that left over the last several days,” said Tim Mayopoulos, who has been appointed as CEO of Silicon Valley Bridge Bank.

In a bid to restore depositor confidence and prevent a bank run, the FDIC has expanded its deposit guarantee coverage for SVB to include all deposits, not just those below the usual $250,000 coverage cap.

Kosturos said that SVB Financial Group would work “cooperatively” with Silicon Valley Bridge Bank in “finding practical solutions to maximize the recoverable value for stakeholders of both entities.”

The process of resolving SVB and establishing Silicon Valley Bridge Bank in its place means that SVB depositors are fully protected while shareholders and bondholders are exposed to losses. Still, in the resolution of SVB recoveries are possible as buyers are found for its assets.

California regulators shuttered SVB last Friday and appointed the FDIC as receiver, marking the biggest bank collapse in the United States since Washington Mutual went bust during the 2008 financial crisis.

SVB’s collapse was prompted by a $1.8 billion loss on a forced $21 billion bond liquidation that spooked investors and led to a bank run.

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