Silicon Valley Bank’s Former Parent Files for Chapter 11

Silicon Valley Bank's former parent company filed for Chapter 11 bankruptcy protection on Friday, a week after the U.S. government took over its commercial bank that teetered from a run on deposits.

Source: Axios | Published on March 17, 2023

Chapter 11 SVB

Silicon Valley Bank’s former parent company filed for Chapter 11 bankruptcy protection on Friday, a week after the U.S. government took over its commercial bank that teetered from a run on deposits.

Why it matters: The move is an effort to preserve value for the remaining businesses that sit within parent holding company SVB Financial Group.

The filing comes after a group of investors purchased holding company bonds and pushed for the bankruptcy process.

State of play: The FDIC is managing the commercial bank, SVB, and still seeking a buyer in a separate process.

The FDIC wants a bank to purchase the whole SVB entity, and is deterring the involvement of hedge funds and other investors interested in parts of the business, sources familiar with the matter say.

A second effort to sell the FDIC-owned commercial banking business is currently underway, after the regulator was unable to find a buyer last weekend.

Catch up fast: Nasdaq-listed SVB Financial Group said on Monday it was pursuing strategic alternatives — including the sale of its investment arm, SVB Capital, and its investment banking business, SVB Securities.

That process is ongoing, the company said on Friday, making clear that SVB Capital and SVB Securities are not part of the Chapter 11 filing.

Those entities “continue to operate in the ordinary course as SVB Financial Group proceeds with its previously announced exploration of strategic alternatives for these valuable businesses,” the company said.

SVB Financial Group also clarified that it is no longer affiliated with SVB, the commercial bank currently under receivership, or SVB’s private wealth business.

Zoom in: Centerbridge Partners, Davidson Kempner Capital Management and Pacific Investment Management purchased bonds in the holding company over the weekend and formed a creditor group, the Wall Street Journal reported on Tuesday.

The group wanted the parent company to file for bankruptcy and then auction SVB Financial’s nonbank businesses through a court-supervised process, Axios has confirmed.

The group got its wish on Friday with SVB Financial’s Chapter 11 filing — but where the auction goes and who receives the proceeds remains unclear.

Of note: In its bankruptcy filing, SVB Financial Group said it believes it has approximately $2.2 billion of liquidity, $3.3 billion in debt, and $3.7 billion of preferred shares.