SVB Financial plans to hand venture capital business to creditors

THE bankrupt parent company of Silicon Valley Bank (SVB) plans to turn over its remaining venture capital (VC) business to a new, creditor-backed company while it continues to fight US regulators’ seizure of nearly US$2 billion in cash, according to court documents filed on Tuesday (Jan 9).

SVB Financial Group reached a restructuring agreement with key creditors, and has the support of a coalition of banks and investment funds that collectively hold more than US$2.3 billion in SVB Financial debt and preferred stock investments, documents filed in the Manhattan bankruptcy court showed.

The company filed for bankruptcy in March after SVB collapsed, becoming the third-largest bank failure in US history. SVB Financial has used its bankruptcy to sell assets and spun off off its investment banking unit in June, but the restructuring agreement ends its effort to find an outside buyer for the VC business.

SVB Capital, the company’s VC business, manages about US$10 billion in investments on behalf of about 750 limited partner investors, such as public pensions, that have contributed capital to the investment fund, according to court documents.

“We believe that retaining SVB Capital under a reorganised company is the best path forward to maximise its value in the current environment,” SVB Financial chief restructuring officer William Kosturos said in a statement.

The coalition backing the deal, which includes MFN Partners, Pimco, Bank of America Securities, JP Morgan Securities and King Street Capital, holds about 48 per cent of SVB Financial’s most senior debt.

The restructuring agreement will be incorporated into a formal bankruptcy plan later this month, and must be approved by a US bankruptcy judge before it becomes final.

The restructuring agreement also would create a new corporate entity to continue SVB Financial’s litigation with the Federal Deposit Insurance Corp (FDIC) over the seized cash.

When the FDIC took over SVB, it sought to avert a broader banking crisis by fully backstopping all deposits at the bank, even those over the US$250,000 guaranteed by law.

SEE ALSO

SVB Financial strikes deal with creditors, eyes asset shuffle

SVB Financial has said its own accounts should have been included when the FDIC moved to protect “all” deposits at the bank. FDIC disagreed, and has said that SVB Financial’s cash could be seized to cover the cost of bailing out the failed bank. REUTERS