June 1, 2023

The parent company of Silicon Valley Bank, taken over last week by the US, files for Chapter 11 bankruptcy protection.

SVB Financial Group, along with its CEO and CFO, were the victims of a class action this week alleging that the company did not disclose the risks of future interest rate hikes to its business.

SVB Financial Group is no longer associated with Silicon Valley Bank after it was confiscated by the Federal Deposit Insurance Corporation. Its collapse was the second-biggest bank failure in U.S. history, following the closure of Washington Mutual in 2008.

The bank’s successor, Silicon Valley Bridge Bank, is under FDIC jurisdiction and is not included in the Chapter 11 filing.

“The Chapter 11 process will allow SVB Financial Group to preserve value as it evaluates strategic alternatives for its valuable businesses and assets, especially SVB Capital and SVB Securities,” William Kosturos, chief restructuring officer at SVB Financial Group, said Friday. . . .

Regulated broker-dealer SVB Securities and venture capital funds, as well as private lending fund platform SVB Capital and its general partner organizations are not included in the Chapter 11 application and continue to operate as usual.

SVB Financial Group’s funded debt is approximately US$3.3 billion in aggregate principal of unsecured notes. There are no claims against SVB Capital or SVB Securities. SVB Financial Group also has $3.7 billion of preferred shares outstanding.

SVB Financial Group estimates that its liquidity is approximately $2.2 billion. The Santa Clara, California-based company said it also has other high-value investment securities accounts and other assets for which it is exploring strategic options.

The closure of Silicon Valley Bank last Friday and New York’s Signature Bank two days later revived bad memories of the financial crisis that plunged the United States into the 2007-2009 Great Recession.

Over the weekend, the federal government, determined to restore public confidence in the banking system, took steps to protect all bank deposits, even those that exceeded the FDIC’s $250,000 individual account limit.

Leave a Reply

Your email address will not be published. Required fields are marked *