Days within SVB’s dramatic collapse, the parent firm of Silicon Valley Bank (SVB) has now walked down the same path. SVB Financial has filed for chapter 11 bankruptcy, declaring a $2.2Bn liquidity. SVB Financial Group on Friday, filed for a court-supervised reorganization under Chapter 11 in the United States Bankruptcy Protection Court for the Southern District of New York “to preserve value.”
This comes weeks after trading was halted for SVB Financial, which was at nearly $12Bn market cap before share price plunged, wiping nearly 50% of that value. US regulators have since seized control of the company, its subsidiaries, and its assets. It also comes after investors and Wall Street were spooked by the sudden collapse of SVB – once the 16th largest bank in the US and one of the most prominent lenders for technology start-ups across the world – which left numerous tech startups and businesses desperately scrambling for financial aid. SVB Financial is the holding company for Silicon Valley Bank and other subsidiaries.
From the looks of it, the bankruptcy process will be separate from the sale of SVB’s remaining assets by the Federal Deposit Insurance Corporation (FDIC) and comes even as the company seeks buyers for its assets. In the Chapter 11 petition, SVB Financial Group listed assets and liabilities of as much as $10 billion each.
In an official statement, the company revealed that the funds and general partner entities of SVB Securities and SVB Capital are not included in the Chapter 11 filing. For now, SVB Capital (a VC and private credit fund platform) will continue to operate normally and serve its clients, will continue to have access to sources of funding, and the parent company remains “committed to providing SVB Capital with support throughout the reorganization process.” The same conditions are applicable for SVB Securities (a regulated broker-dealer).
“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,” said William Kosturos, Chief Restructuring Officer for SVB Financial Group. “SVB Capital and SVB Securities continue to operate and serve clients, led by their longstanding and independent leadership teams.”
“SVB Financial Group will continue to work cooperatively with Silicon Valley Bridge Bank,” Kosturos added. “We are committed to finding practical solutions to maximize the recoverable value for stakeholders of both entities.” For now, the company intends to use the court-supervised process to evaluate “strategic alternatives” for SVB Capital, SVB Securities, and its other assets and investments, the statement added.
The collapse of Silicon Valley Bank served as a prelude to a fall in the global stock markets (shares of major US banks slumped in the aftermath) and became the second-largest failure in US banking history. In fact, its collapse was the largest since the financial crisis in 2008.
As of December 31, 2022, SVB had $209 billion in assets and approximately $175.4 billion in deposits, and it was later forced to sell a portfolio of treasuries and mortgage-backed securities to Goldman Sachs at a loss of $1.8 billion. In its official statement, the company announced that it had about $2.2 billion of liquidity, and was “exploring strategic alternatives” for its other valuable investment securities accounts and other assets. Furthermore, its funded debt amounted to around $3.3 billion in aggregate principal amount of unsecured notes.