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SVB financial files for Ch. 11 bankruptcy protection, said to have $2.2 billion in cash

A week after trading was halted for SVB Financial and regulators took over the holding company of Silicon Valley Bank and other subsidiaries, SVB Financial has taken the next inevitable step: today it announced that she had formally filed for Chapter 11 bankruptcy protection in the United States. Southern District Bankruptcy Court of New York. This means that SVB Financial can ask, and plans to ask, the courts to resume operations while finding buyers for its assets, which includes continuing its plans to sell SVB Securities and SVB Capital, and more.

As part of the process, SVB Financial is also disclosing part of the financial position of the holding company, which had a market capitalization of around $12 billion before shares plunged last Friday as depositors raced. on the bank. (Trading halted when the market capitalization was reduced to about half of that $12 billion.)

The statement noted that the company “estimates that it has approximately $2.2 billion of liquidity. He also noted that consolidated debt is approximately $3.3 billion “in aggregate principal amount of the unsecured notes”, which are only a remedy against SVB Financial Group, “and have no claims against SVB Capital or SVB Securities”, which are legally separate entities. SVB Financial Group “has also $3.7 billion of preferred shares outstanding,” he said.

“SVB Financial Group intends to use the court-supervised process to evaluate strategic alternatives for SVB Capital, SVB Securities and the company’s other assets and investments,” it noted in a statement. This effort is being led by a five-member Restructuring Committee, with assistance from Centerview Partners LLC. Any sale process will be conducted under Chapter 11 proceedings and will be subject to court approval, he added.

He also provided an update on the sale of assets that were currently and formerly owned by the group.

There have been many hiccups in the search for a buyer for the banking division of SVB, whose post-fed takeover is now called Silicon Valley Bridge Bank. This process is overseen by regulators. On the other hand, the group said it had “a significant interest” in SVB Securities and SVB Capital. These two people still sit under SVB Financial, but they are technically different legal entities and are therefore not included in the Chapter 11 filing, nor in the sale of the bridge bank. They also continue to operate while separately shopping for potential buyers, a process that began earlier this week.

The key thing about Chapter 11 is that it will mean that SVB Financial Group can resume operations outside of FDIC control while it takes the next steps.

To that end, the holding company said it plans to file “usual first-day petitions with the bankruptcy court which, among other things, seek permission to continue operations of SVB Financial Group in the ordinary course of business. cases as soon as a hearing can be scheduled. Additional documents relating to the bankruptcy court proceedings will be filed in the coming days,” the company said in its statement.

“The Chapter 11 process will allow SVB Financial Group to preserve value as it evaluates strategic alternatives for its prized businesses and assets, particularly SVB Capital and SVB Securities,” said Guillaume Kosturos, chief restructuring officer of SVB Financial Group, in a statement. “SVB Capital and SVB Securities continue to operate and serve their clients, led by their longstanding independent management teams.”

As we previously reported, SVB Capital has approximately $9.5 billion in assets under management, with investments in both a number of major venture capital firms and funds, as well as startups. directly. SVB Securities has been around in one form or another since 1999. Based in Boston, it negotiates mergers and acquisitions and provides other services to startups and others in nearly 700 transactions.

SVB Financial also noted that in addition to cash and interests in SVB Capital and SVB Securities, “the financial group has other valuable investment securities accounts and other assets for which it is also exploring strategic alternatives. “. He didn’t elaborate on the specifics of these in his statement today, but we’ll likely see more about them as the story unfolds over the next few weeks.

In a separate call to at-risk customers on Friday, Silicon Valley Bridge Bank CEO Tim Mayopoulos addressed the matter while appearing to read from a script. “All Silicon Valley Bridge Bank bonds are backed by the FDIC and the full faith and credit of the U.S. government,” he said, reiterating that SVB Bank, SVB Securities and SVB Capital are not included in the bankruptcy file, in accordance with the previous declaration. Wealth management and private banking activities are included in the bankruptcy filing.

“We try to be very clear about which institutions are covered and which are not,” he said later on the call, as more questions emerged from clients on the morning news.

Additional reports Natasha Mascarenhas.

Contact Ingrid Lunden on Twitter; DM there for Signal.

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