The bankrupt parent entity of Silicon Valley Bank is set to transfer its remaining venture capital operations to a newly established company supported by creditors while it battles the U.S. regulators’ appropriation of almost $2 billion in funds. This plan was detailed in court documents submitted on Tuesday.
SVB Financial Is Ready To Hand Over VC Business to Creditors
SVB Financial Group has formulated a restructuring plan with principal creditors, gaining the endorsement of a consortium of banks and investment firms. This group, holding over $2.3 billion in SVB Financial’s debt and preferred stock, was mentioned in the documents presented to the Manhattan bankruptcy court.
Following the collapse of Silicon Valley Bank in March, which marked the third-largest banking failure in U.S. history, SVB Financial declared bankruptcy. The company has been liquidating assets during its bankruptcy, including divesting its investment banking division in June. However, this restructuring agreement marks the end of its search for an external buyer for its venture capital segment.
SVB Financial’s Chief Restructuring Officer, William Kosturos, stated, “Maintaining SVB Capital within a restructured entity is the most effective strategy to optimise its value in the current market conditions.”
The deal’s supporters include MFN Partners, Pacific Investment Management Company, Bank of America Securities, JP Morgan Securities, and King Street Capital, collectively owning approximately 48% of SVB Financial’s priority debt.
Don’t miss out the latest news, subscribe to LeapRate’s newsletter
This restructuring agreement will be integrated into an official bankruptcy plan later in the month, requiring a U.S. bankruptcy judge’s approval before finalising it. SVB Capital, the company’s venture capital arm, oversees around $10 billion in investments for roughly 750 limited partner investors, such as public pension funds, as per the court filings.
Additionally, the agreement proposes forming a new corporate body to continue SVB Financial’s legal dispute with the Federal Deposit Insurance Corp (FDIC) regarding the confiscated funds. When the FDIC intervened with Silicon Valley Bank, it aimed to prevent a wider banking crisis by securing all deposits, including those exceeding the legally guaranteed $250,000 limit.
SVB Financial argues that its accounts should have been safeguarded under the FDIC’s pledge to protect “all” deposits at the bank. However, the FDIC contends that the funds from SVB Financial could be used to offset the costs incurred in the bank’s rescue.
