The parent company of a Silicon Valley bank has filed for bankruptcy, facilitating the sale of its remaining assets after federal regulators seized the technology-focused bank at the heart of its business.
SVB Financial Group filed for Chapter 11 protection in New York bankruptcy court on Friday, the largest bankruptcy filing since the bank’s 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 rush of depositors. The Federal Reserve has stepped in to make depositors whole and calm markets, even as a number of other regional US banks have seen credit downgrades and depositors withdraw cash.
Silicon Valley Bank, now operating as Silicon Valley Bridge Bank NA under the control of the Federal Deposit Insurance Corporation, is not part of the Chapter 11 filing.
Bankruptcy offers a court-supervised process that helps a parent company find new owners for its non-federally regulated business lines. Its other activities include SVB Capital, an investment manager that oversees $9.5 billion in assets 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.
Advertisement – Scroll to Continue
SVB Financial Group announced on 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 he is working to find ways to maximize return for shareholders of SVB Financial Group and Silicon Valley Bridge Bank.
SVB Financial Group publicly trades shares listed on the Nasdaq stock exchange, which have been suspended for trading since March 9. In her Chapter 11 petition, she names Vanguard Group, BlackRock Inc.
and State Street corp.
as holding more than 5% of its voting securities. It also has over $3 billion in bond debt and nearly $4 billion in preferred stock, which have traded at reduced levels since the bank entered bankruptcy.
Advertisement – Scroll to Continue
Hedge funds and other asset managers piled into bonds issued by SVB Financial, even as U.S. government officials warned that investors in the bank were likely to be wiped out. A group of bondholders that includes Centerbridge Partners, Davidson Kempner Capital Management LP and Pacific Investment Management Co. is betting on raising proceeds from the sale of the company’s private equity and other units, The Wall Street Journal reported.
SVB Financial said Friday it believes it has about $2.2 billion in liquidity. In addition to cash and its holdings in SVB Capital and SVB Securities, SVB Financial Group has other valuable securities accounts and other assets for which it is also exploring strategic alternatives.
Financial advisor PJT Partners Inc.
and law firm Davis Polk & Wardwell LLP are advising the group of bondholders, according to people familiar with the matter. SVB Financial is working with Centerview Partners LLC as financial advisor, Sullivan & Cromwell LLP as legal advisor and Alvarez & Marsal as restructuring advisor, the company said in a statement.
Advertisement – Scroll to Continue
Friday’s bankruptcy filing could also help SVB Financial’s directors and officers secure relief from any civil lawsuits creditors or shareholders may seek against them for alleged mismanagement of the company.
When assets are sold through bankruptcy, the proceeds often flow to creditors. However, investors are assessing the risk that SVB Financial may need to help cover losses at the Silicon Valley bank, which regulators did not disclose.
It is not uncommon for a holding company to file for bankruptcy after the bank it owns is placed in federal bankruptcy. Washington Mutual filed for Chapter 11 protection after its Washington Mutual Bank subsidiary collapsed in 2008, the largest bank failure in US history. Washington Mutual Bank was taken over by federal regulators and later sold to JPMorgan Chase & Co.
Write to Alexander Saeedy at alexander.saeedy@wsj.com
