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SVB Financial has officially filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York. This comes one week after trading was stopped for the company and regulators took control of the holding company for Silicon Valley Bank and other subsidiaries.As a result, SVB Financial will be able to petition the courts for permission to resume its business operations while finding buyers for its assets, including moving forward with its plans to sell SVB Securities and SVB Capital, among other things.
SVB Financial is also concealing a portion of the holding firm’s financial situation as part of that process.The holding company had a market cap of around $12 billion before its shares fell last Friday as a result of a run on the bank. Trading was suspended after the market capitalization was reduced to roughly $12 billion.
The corporation “believes it has about $2.2 billion of liquidity,” according to the statement. The funded debt, which is roughly $3.3 billion “in aggregate principal amount of unsecured notes,” is also mentioned. These notes only have recourse against SVB Financial Group and have no claim whatsoever against SVB Capital or SVB Securities, which are two legally distinct businesses. There are “also $3.7 billion in outstanding preferred equity,” according to SVB Financial Group.
In a statement, SVB Financial Group stated that it planned to use the court-supervised process to assess strategic options for SVB Capital, SVB Securities, and the company’s other assets and investments. A five-person restructuring group is in charge of that endeavor, with Centerview Partners LLC providing support. It further stated that any sale procedure would follow the Chapter 11 proceeding and would require court approval.
Also, it gave an update on the sale of assets that had previously been part of the group.
Finding a buyer for SVB’s banking division has been hard, and the process is being watched by the government. However, SVB Securities and SVB Capital are getting “strong interest.”These two are not included in the Ch. 11 filing because they are legally two separate legal companies. They are still in business and are also being marketed on their own to people who might want to buy them. This process started earlier this week.
William Kosturos, who is the Chief Restructuring Officer for SVB Financial Group, said in a statement that the Chapter 11 process will help the company keep its value while it looks at strategic options for its most valuable companies and assets, like SVB Capital and SVB Securities.Under the direction of their seasoned, independent leadership teams, SVB Capital and SVB Securities are still in business and providing services to clients.
As we’ve previously mentioned, SVB Capital manages around $9.5 billion in assets, investing both directly in companies and through a number of significant VCs and funds. Since 1999, SVB Securities has existed in some capacity. It is based in Boston and has handled close to 700 deals for startups, providing services in the process.
SVB Financial also said that besides cash and shares in SVB Capital and SVB Securities, “the Financial Group has other attractive investment securities accounts and other assets for which it is also looking for strategic alternatives.”
The main benefit of Chapter 11 is that SVB Financial Group can start up again without help from the FDIC while it thinks about its options. To that aim, the holding company announced that it intends to file “customary first-day motions with the Bankruptcy Court that, among other things, seek authorization to continue the operations of SVB Financial Group in the usual course of business as soon as a hearing can be arranged. In the upcoming days, additional documents pertaining to the Bankruptcy Court process will be filed.
