As SVB auction continues, sale of its UK arm bounces among potential suitors

Update: HSBC is now buying SVB UK. Full story here. The previous story continues below.

In the US today, The Federal Deposit Insurance Corp. continued the auction process for beleaguered Silicon Valley Bank, with final bids due Sunday afternoon, according to Bloomberg.

Any agreed sales may not be known until Sunday night, if at all. It is still possible that no agreement will be reached and the bank will be declared insolvent. SVB had more than $175 billion in deposits and $209 billion in total assets. The FDIC is reportedly trying to make at least a portion of customers’ uninsured deposits available starting Monday.

US Treasury Secretary Janet Yellen said on Sunday that the government would not bail out Silicon Valley Bank with public money, but added that she was concerned about depositors, the vast majority of which are tech companies, who are reeling from what they it is the worst bank failure since the 2008 financial crisis. As TechCrunch previously reported, the Silicon Valley Bank crisis also has implications for companies thousands of miles away. For example, more than 60 YC-backed Indian startups have more than $250,000 stuck in accounts with SVB.

And that’s just the tip of the iceberg abroad.

On the other side of the Atlantic, after a hectic weekend involving regulators and the UK government, Silicon Valley Bank UK Limited (SVB UK), which is a legally separate company from SVB in the US, is expected. In the US, start insolvency proceedings tonight (Sunday, March 12). 2023) as we reported yesterday. The move was confirmed today by the London law firm Osborne Clarke.

This means that SVB UK clients will be unable to withdraw or deposit with the bank, creating huge liquidity problems for many depositors and/or borrowers, leaving many tech startups unable to execute crucial actions such as paying staff.

UK tech entrepreneurs and venture capitalists spent the weekend lobbying the government to step in and provide support to affected depositors and/or borrowers or lead a sale of the bank.

On Sunday morning, the UK government was drawing up plans for some sort of emergency cash lifeline for tech companies.

Chancellor Jeremy Hunt told Sky News: “We will, very soon, come up with plans to make sure people can meet their cash flow requirements and pay their staff, but obviously what we want to do is find a long-term solution. that minimizes, or even completely avoids, the losses of some of our most promising companies.”

In a statement, the foreign minister warned that the sector was at “serious risk” and a “high priority” for the government, announcing that it was “treating this issue as a high priority” and “working at the pace of a solution to avoid or minimize damage to some of our most promising businesses in the UK.”

Sources told TechCrunch this could take the form of a “recapture lending approach” in which SVB UK’s tech clients could borrow from a major UK bank, with the state acting as guarantor.

However, as of Sunday night, no obvious solutions had been presented, despite much speculation about a potential buyer for SVB UK.

A joint letter signed by more than 200 technology executives over the weekend said many companies faced becoming “technically insolvent” after the collapse of SVB UK.

Responding to the events following the Silicon Valley Bank collapse, British Private Equity and Venture Capital Association (BVCA) CEO Michael Moore said: “We have been working overnight with our members to gather data and demonstrate the implications of the collapse of Silicon Valley Bank. . We welcome the Chancellor’s update that the government will announce support for affected businesses. This is an urgent matter. Help is needed tomorrow. The immediate implications for the technology and the broader private equity ecosystem are far-reaching. It involves a lot of highly skilled jobs.”

Dom Hallas, chief executive of Coadec, the UK policy group representing tech startups, issued the statement: “There are a large number of startups and investors in the ecosystem who have significant exposure to SVB UK and will be very worried. We have engaged with the UK government, including the Treasury and No10, about the potential impact.”

UK companies will only be able to recover £85,000 under the Financial Services Compensation Plan, or £170,000 for joint accounts. With SVB UK having over 3,500 clients and many accounts running into the millions, the situation looks bleak. SVB UK reportedly had nearly £7bn in deposits when it was deemed insolvent by the BoE on Friday.

In other developments, Sky News and the Evening Standard reported on Sunday that the government had approached Barclays and Lloyds Banking Group about an emergency takeover deal.

In addition, the BBC also named a new clearing bank, The Bank of London, as a possible suitor.

Sky News also reported that Oaknorth Bank, a British neobank, digital lender, previously valued at almost $3bn, could make a bid to buy SVB-UK, according to its sources, but a formal offer would be subject to due diligence that could last “several days.”

Oaknorth, which has declined to comment, was co-founded by Rishi Khosla, who has donated hundreds of thousands of pounds to the Conservative Party, the UK’s ruling party.

The FT reported that SVB-UK’s field of buyers could also include Abu Dhabi state holding ADQ and conglomerate IHC.

Bloomberg noted that Sheikh Tahnoon (Chairman of Royal Group) oversees wealth fund ADQ, as well as First Abu Dhabi Bank PJSC and the $790 billion Abu Dhabi Investment Authority emirate wealth fund.

And as Sunday progressed, HSBC Holdings and JP Morgan were also said to be among those potentially looking to acquire SVB-UK.

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James D. Brown
James D. Brown
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