One week after operations of SVB Financial were halted and regulators seized control of Silicon Valley Bank’s holding company and other subsidiaries, SVB Financial has taken the next inevitable step: today it announced that it has formally filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of NY. This will mean that SVB Financial can and plans to file an application with the courts to resume business while it finds buyers for its assets, including moving forward with its plans to sell SVB Securities and SVB Capital, and more.
As part of that process, SVB Financial is also releasing part of the financial statement for the holding company, which had a market capitalization of around $12 billion before shares plunged last Friday as depositors made a run on the bank. . (Trading was halted at the point where the market capitalization dropped to about half of that $12 billion.)
The statement noted that the company “believes it has approximately $2.2 billion of liquidity.” He also pointed out that the financed debt is approximately $3.3 billion “in the aggregate principal amount of the unsecured notes”, which are only a recourse for SVB Financial Group, “and have no right to claim against SVB Capital or SVB Securities”, which are legally separate entities. SVB Financial Group “also has $3.7 billion of preferred capital outstanding,” he said.
“SVB Financial Group intends to use the court-supervised process to assess strategic alternatives for SVB Capital, SVB Securities and other Company assets and investments,” it said in a statement. That effort is being led by a five-member restructuring committee, assisted by Centerview Partners LLC. Any sale process will be carried out through the Chapter 11 procedure and will be subject to court approval, he added.
He also provided an update on the sale of assets currently and previously held within the group.
There have been many setbacks in the search for a buyer for SVB’s banking arm, which after the Fed takeover is now called Silicon Valley Bridge Bank. That process is being overseen by regulators. Rather, the group said it had a “significant interest” in SVB Securities and SVB Capital. These two are still under SVB Financial, but they are technically different legal entities and are therefore not included in the Chapter 11 filing, nor in the sale of the bridge bank. They are also continuing to trade while being separately matched with potential buyers, a process that began earlier this week.
The key with Chapter 11 is that it will mean that SVB Financial Group can resume operations outside of the FDIC’s control while it works on the next steps.
To that end, the holding company said it plans to file “customary first-day petitions with the Bankruptcy Court that, among other things, seek authorization to continue operations of SVB Financial Group in the normal course of business as soon as it can be concluded.” an audience”. programmed. Additional documents related to the Bankruptcy Court proceedings will be submitted in the coming days,” the company said in its statement.
“The Chapter 11 process will allow SVB Financial Group to preserve value while evaluating strategic alternatives for its prized businesses and assets, especially SVB Capital and SVB Securities,” it said. Guillermo Kosturos, head of restructuring at SVB Financial Group, in a statement. “SVB Capital and SVB Securities continue to operate and serve clients, led by their long-standing and independent leadership teams.”
As we previously reported, SVB Capital has around $9.5 billion in assets under management, with investments both in several major funds and VCs, as well as in startups directly. SVB Securities has been around in one form or another since 1999. Headquartered in Boston, it has negotiated mergers and acquisitions and provided other services to startups and others in nearly 700 deals.
SVB Financial also noted that in addition to cash and interests in SVB Capital and SVB Securities, “Group Financial has other valuable investment securities accounts and other assets for which it is also exploring strategic alternatives.” He didn’t elaborate on the details of these in his statement today, but we’ll likely see more on this as the story unfolds in the coming weeks.
On a separate call for venture clients on Friday, Silicon Valley Bridge Bank CEO Tim Mayopoulos addressed the presentation while appearing to read a script. “All of Silicon Valley Bridge Bank’s obligations are backed by the FDIC and the full faith and credit of the US government,” it said, reiterating that SVB Bank, SVB Securities and SVB Capital are not included in the bankruptcy filing, according to the above statement. Estate and private banking businesses are included in the bankruptcy filing.
“We are trying to be very clear about which institutions are affected and which are not,” he said later on the call, as more customer questions surfaced on the morning news.
additional reports Natasha Mascarenhas.
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