Former parent firm of failed Silicon Valley Bank files for bankruptcy

The bankruptcy does not include Silicon Valley Bank, which the Federal Deposit Insurance Corporation governs.
Baba Tamim
The Silicon Valley Bank (SVB) logo is seen through a rain covered window in front of the SVB headquarters on March 10, 2023.
The Silicon Valley Bank (SVB) logo is seen through a rain covered window in front of the SVB headquarters on March 10, 2023.

Justin Sullivan/Getty Images 

Silicon Valley Bank's former parent company, SVB Financial, has filed for bankruptcy just a week after the tech-dependent bank was shut down by regulators. 

SVB Financial Group declared that it has voluntarily petitioned the United States Bankruptcy Court for the Southern District of New York for Chapter 11, per a Friday statement by the company. 

"SVB Securities and SVB Capital's funds and general partner entities are not included in the Chapter 11 filing," read the statement

They "continue to operate in the ordinary course as SVB Financial Group proceeds with its previously announced exploration of strategic alternatives for these valuable businesses." 

This means the Federal Deposit Insurance Corporation (FDIC), which now governs the failed Silicon Valley Bank, is not included in the bankruptcy.

The company filed for bankruptcy after federal regulators took over the tech lender following a 36-hour surge in depositor withdrawals that triggered the worst bank collapse since the 2008 financial crisis.

The Wall Street Journal reported earlier that a number of hedge funds and asset managers had purchased discounted bonds issued by SVB Financial despite government officials' warnings that investors would probably lose everything.

'Recoverable value'

Assets liquidated during bankruptcy are often distributed to creditors. In this situation, however, investors in SVB Financial, which holds about $2.2bn in cash and marketable securities, $3.3bn of bond debt, and $3.7bn of preferred stock, may need to assist in covering losses at SVB.

The Chapter 11 process will allow SVB Financial Group to preserve value as it evaluates strategic alternatives for its prized businesses and assets, especially SVB Capital and SVB Securities," said William Kosturos, Chief Restructuring Officer for SVB Financial Group. 

"SVB Capital and SVB Securities continue to operate and serve clients, led by their longstanding and independent leadership teams."

The petition for bankruptcy comes a day after the top banks on Wall Street announced a $30 billion commitment to support First Republic, another mid-sized bank whose depositors fled after being scared away by the current banking crisis.

The action, planned in conjunction with US regulators, served as a firewall by defending First Republic and preventing the crisis from spreading to other mid-sized banks. 

The news of the deal drove up the share price of First Republic on Thursday, but Friday saw a dramatic decline as concerns about the state of the baking industry reappeared, reported The Guardian

Meanwhile, the Chief Restructuring Officer has said that "SVB Financial Group will continue to work cooperatively with Silicon Valley Bridge Bank."

"We are committed to finding practical solutions to maximize the recoverable value for stakeholders of both entities," Kosturos added. 

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