Silicon Valley Bank’s parent company, the lender, filed for Chapter 11 bankruptcy in federal court in New York last week after US regulators.
SVB Financial Group’s move is an attempt to save the value of two units – a broker-dealer and a technology investing business – that are separate from the main deposit-taking bank that failed last week, sending shockwaves through global financial markets.
SVB Financial said it had about $2.2bn in cash and liquid securities, $3.3bn in bond debt and $3.7bn in preferred stock.
SVB Financial’s chief restructuring officer William Kosturos said the court-supervised bankruptcy process would allow the group to “preserve value as it evaluates strategic options for its valuable businesses and assets”.
He said SVB Capital and SVB Securities, the tech investing and broker-dealer businesses, “continue to be managed and served by their long-standing and independent leadership teams”. In 2022, SVB Securities reported $518mn in revenue, according to company filings.
Senior bonds in the parent group were trading at 60 cents on the dollar on Friday, suggesting investors believe they will recover value from the stricken group. The bonds earlier traded at around 30 cents on the dollar after US regulators seized the stricken bank a week ago.
Some specialist funds have taken up the debt, according to people familiar with the situation. An investment firm that owns SVB Financial debt told the Financial Times that a “scavenger hunt” was underway to find value in the parent company that could support a bigger recovery for bondholders.
Shares of SVB Financial have been suspended since the bank subsidiary was taken over by the Federal Deposit Insurance Corporation. The group’s market capitalization exceeded $15bn before the bank went bust, although it is now expected to be wiped out.
The SVB Financial Board has formed a restructuring subcommittee that is working with advisors from Centerview Partners, Sullivan & Cromwell and Alvarez & Marshall.
The FDIC took over the Silicon Valley bank last Friday after depositors withdrew $42bn in one day, about a quarter of its total deposits. Officials then tried to sell the bank without success. Private equity groups have expressed interest in acquiring SVB’s loan book; However, the FDIC is holding out to see if it can find an acquirer for the entire bank, people familiar with the sale process said.
SVB is the second largest bank failure in US history and the shock of its collapse reverberated through other regional lenders. Shares in another California-based lender, First Republic, have fallen more than 60 per cent this week after the biggest US banks moved to deposit $30bn into the bank to shore up its finances.
