Finance & Banking , Industry Specific
SVB Parent Company Seeks Bankruptcy Amid Asset Sale ProcessSVB Financial Group Pursues Chapter 11 to Sell Assets Outside the Commercial Bank
The former parent company of Silicon Valley Bank filed for Chapter 11 bankruptcy protection Friday in an effort to streamline the sale of its assets.
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SVB Financial Group hopes the court-supervised bankruptcy process will help it find new owners for investment bank SVB Securities, wealth management company SVB Private and investment manager SVB Capital. Silicon Valley Bank itself isn't included in the reorganization filing since the Federal Deposit Insurance Corp. took over the commercial banking business on March 10 (see: SVB Collapse Is 'Self-Inflicted Gunshot Wound' for Startups).
"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," Chief Restructuring Officer William Kosturos said in a statement. "We are committed to finding practical solutions to maximize the recoverable value for stakeholders of both entities."
SVB Financial Follows in Footsteps of Washington Mutual
SVB Financial Group said it has approximately $2.2 billion of liquidity, $3.3 billion of outstanding debt and $3.7 billion in preferred stock shares. Voluntary bankruptcy filings are often used to facilitate a sale if the amount of debt exceeds the expected proceeds. Without a court-supervised bankruptcy process, SVB Financial would have to get approval from all of its debtholders, which can be a very tough sell.
The SVB Financial Group Chapter 11 filing follows in the footsteps of Washington Mutual, which filed for bankruptcy protection in 2008 after its banking subsidiary Washington Mutual Bank was taken over by federal regulators and eventually sold to JPMorgan Chase. With $209 billion in total assets, the Silicon Valley Bank collapse was the second-largest bank failure in U.S. history, behind only Washington Mutual.
The bankruptcy filing might also put SVB Financial directors and officers in a better position to thwart civil litigation brought by creditors or shareholders alleging mismanagement. It's unclear whether proceeds from selling SVB Financial will be needed to cover losses at Silicon Valley Bank since regulators haven't given a sign either way. SVB Financial traded on Nasdaq until March 9, at which time trading was halted.
The FDIC announced late Sunday plans to operate Silicon Valley Bank as a bridge bank and named former Federal National Mortgage Association CEO Tim Mayopoulos as its new leader. Federal officials replaced the entire Silicon Valley Bank senior management team, though the company's rank-and-file employees all remain in place (see: Feds Will Make SVB Depositors Whole, Avoiding Payroll Crisis).
"Depositors have full access to their money and both new and existing deposits are fully protected by the FDIC," Mayopoulos wrote in a note Tuesday. "The No. 1 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."
Future of SVB, Banking Industry Hangs in Balance
The U.S. government is only open to selling Silicon Valley Bank to another bank, ruling out the private equity firms and venture capitalists that had been exploring making a bid, The Information reported Wednesday. The goal is to sell what remains of the bank in one piece, and regional banks are most likely to win a bidding process for Silicon Valley Bank since large institutions would need a regulatory waiver (see: SVB Dominoes Fall: HSBC Buys UK Arm; Feds Grab Canadian Arm).
Silicon Valley Bank's collapse set off a chain of financial issues for banks around the world. New York's Signature Bank failed Sunday, and Credit Suisse stabilized only after the Swiss central bank agreed to loan it up to $54 billion. On Thursday, First Republic Bank received $30 billion in deposits from a who's who of banks, including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo.
"Their collective support strengthens our liquidity position, reflects the ongoing quality of our business and is a vote of confidence for First Republic and the entire U.S. banking system," First Republic President and CEO Mike Roffler and founder and Executive Chairman Jim Herbert said in a statement.