SVB Financial Files for Chapter 11 Bankruptcy Protection
Silicon Valley Bank’s parent company filed for bankruptcy, facilitating the sale of its remaining assets after the technology-focused bank’s core business was seized by federal regulators.
SVB Financial Group filed for Chapter 11 protection in New York bankruptcy court on Friday, the largest bankruptcy filing stemming from a bank failure since Washington Mutual Inc.
in 2008.
Silicon Valley Bank, the technology-focused lender and SVB Financial’s primary business, was taken over by federal regulators after it was crippled by a scramble for depositor exits. The Federal Reserve stepped in to make depositors whole and calm markets, even as a number of other US regional banks have seen their credit ratings cut and depositors pull cash.
Silicon Valley Bank, now operating as Silicon Valley Bridge Bank NA under the control of the Federal Deposit Insurance Corp., is not part of the Chapter 1[ads1]1 filing.
Bankruptcy offers a court-supervised process to help the parent company find new owners for its business lines that are not under federal control. Its other businesses have included SVB Capital, an investment manager that oversees $9.5 billion in funds on behalf of third-party investors, as well as an investment bank, SVB Securities, and a wealth management company, SVB Private, according to securities filings.
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SVB Financial Group said in a statement Friday that Silicon Valley Bank and SVB Private are no longer affiliated with the parent company.
William Kosturos, the parent company’s chief restructuring officer, said in a statement that he is working to find ways to maximize the recoverable value for stakeholders in SVB Financial Group and Silicon Valley Bridge Bank.
SVB Financial Group has listed shares listed on the Nasdaq exchange, which have been suspended for trading since 9 March. They also have over $3 billion in bond debt and nearly $4 billion in preferred stock, which have been trading at distressed levels since the bank failed.
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Hedge funds and other asset managers have piled into bonds issued by SVB Financial, even as US authorities have warned that investors in the bank are likely to be wiped out. A bond holding group that includes Centerbridge Partners, Davidson Kempner Capital Management LP and Pacific Investment Management Co. is aiming to raise proceeds from the sale of the company’s private equity and other entities, The Wall Street Journal reported.
Financial advisor PJT Partners Inc.
and law firm Davis Polk & Wardwell LLP is advising the bondholder group, according to people familiar with the matter.
Friday’s bankruptcy filing could also help SVB Financial’s directors and executives secure releases for civil lawsuits that creditors or shareholders may seek to bring against them for alleged mismanagement of the company.
When assets are sold through bankruptcy, the proceeds often flow to creditors. However, investors are weighing the risk that SVB Financial may need to help cover losses at Silicon Valley Bank, which regulators have not disclosed.
It is not unusual for a holding company to file for bankruptcy after a bank it owns is placed in federal receivership. Washington Mutual filed for Chapter 11 protection after its subsidiary Washington Mutual Bank collapsed in 2008, the largest bank failure in US history. Washington Mutual Bank was taken over by federal regulators and later sold to
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JPMorgan Chase & Co.
Write to Alexander Saeedy at alexander.saeedy@wsj.com
