The parent company of Silicon Valley Bank, the lender taken over by US regulators last week, has filed for Chapter 11 bankruptcy in a federal court in New York.
The move by SVB Financial Group is an attempt to salvage value from two units — a broker-dealer and a technology investing business — that are separate from the main deposit-taking bank that failed last week, sending shockwaves around global financial markets.
SVB Financial said it had about $2.2bn in cash and liquid securities, $3.3bn of bond debt and $3.7bn of preferred stock.
William Kosturos, chief restructuring officer for SVB Financial, said the court-supervised bankruptcy process would allow the group “to preserve value as it evaluates strategic alternatives for its prized businesses and assets”.
He said SVB Capital and SVB Securities, the tech investing and broker-dealer businesses, “continue to operate and serve clients, led by their longstanding and independent leadership teams”. In 2022, SVB Securities recorded $518mn of revenue, according to company filings.
Senior bonds in the parent group were trading at 60 cents on the dollar on Friday, suggesting investors believed they would recover value from the stricken group. The bonds had earlier traded at about 30 cents on the dollar after US regulators seized the distressed bank a week ago.
Several specialist funds have snapped up the debt, according to people familiar with the situation. One investment firm that holds SVB Financial debt told the Financial Times that a “scavenger hunt” was under way to locate value within the parent company that could support a large recovery for bondholders.
Shares in SVB Financial have been suspended since the bank subsidiary was taken over by the Federal Deposit Insurance Corporation. The group’s market capitalisation before the bank run exceeded $15bn, though that is now expected to be wiped out.
The SVB Financial board has formed a restructuring subcommittee that is working with advisers from Centerview Partners, Sullivan & Cromwell and Alvarez & Marsal.
The FDIC took over Silicon Valley Bank last Friday after depositors withdrew $42bn in one day, about a quarter of its total deposits. Officials have since tried to sell the bank without success. Private equity groups have expressed interest in acquiring SVB’s loan book; however, the FDIC is holding out to see if it can find an acquirer for the whole bank, said people familiar with the sales process.
SVB is the second-largest bank failure in US history and the shock of its collapse has reverberated to other regional lenders. Shares in First Republic, another California-based lender, have declined more than 60 per cent this week with the largest US banks stepping in to deposit $30bn into the bank to bolster its finances.