SVB Financial Group files Chapter 11 petition

The seized bank’s holding company may become the rope in a tug-of-war.

SVB Financial Group, the holding company for Silicon Valley Bank, which was placed into an FDIC receivership a week ago, has filed for Chapter 11 bankruptcy protection from its creditors.

This filing creates the context for an expected battle between SVB Financial’s creditors on the one hand and the FDIC on the other. The bankrupt company will presumably generate cash through the sale of its businesses and assets, which include subscription credit facilities, and both the FDIC and the creditors will make claims on those proceeds.

SVB Financial said in a statement announcing the bankruptcy filing that it plans to use the process, in the US Bankruptcy Court for the Southern District of New York, to give its five-member restructuring committee an opportunity to  “evaluate strategic alternatives” while preserving value.

Silicon Valley Bank, which was Silicon Valley Financial’s primary business, closed on 10 March 2023. The following Monday, 13 March, the FDIC announced the creation of Silicon Valley Bridge Bank to ensure that SVB’s official checks continue to clear and that loan customers know where to continue making payments.

Silicon Valley Bank launched 40 years ago as a wholly-owned subsidiary of Silicon Valley Bancshares, now Silicon Valley Financial. The operating bank became one of the best-known lenders in the world of high-tech start-ups, especially in the region around its home base in Santa Clara, California.

Silicon Valley Financial’s chief restructuring officer, William Kosturos, said that the Chapter 11 filing does not include either SVB Capital – a venture capital and private credit fund platform – or SVB Securities, which he called its “prized businesses”, or general partner entities, which will all continue operations in the regular course, “led by their longstanding and independent leadership teams.”

In its statement announcing the bankruptcy, Silicon Valley Financial said it continues  “to have access to sources of funding, including subscription credit facilities and investor and general partner commitments” other than SVB Capital.

Silicon Valley Financial said it “believes it has approximately $2.2 billion of liquidity.” Its outstanding debt is $3.3 billion.