Key takeaways:
- The SVB Financial Group has filed for Chapter 11 insolvency in the Southern District of New York’s federal bankruptcy court.
- Due to its ownership stakes in SVB Financial Group, SVB Securities, and SVB Capital, the bank also has cash on board.
Earlier today, SVB Financial Group voluntarily petitioned the U.S. Bankruptcy judicial for a Chapter 11 reorganization under judicial supervision.
The funds of SVB Capital, its broker-dealer SVB Securities, and the general partner companies’ funds are not subject to bankruptcy proceedings, according to a statement made by SVB on March 17. While SVB Financial Group continues investigating strategic alternatives for its companies, the entities will carry on as usual.
The bank admitted on March 13 that it was researching other options before revealing the bankruptcy protection plan. This week, the Federal Deposit Insurance Corporation (FDIC) was chosen as the bank’s receiver after California officials opted to close it. The FDIC has the authority to sell its properties in the future.
Additionally, SVB Financial Group clarified that it was no longer associated with Silicon Valley Bank N.A. or SVB Private, the bank’s private banking and asset management division. Silicon Valley Bridge Bank, N.A., the bank’s successor, is not a party to the Chapter 11 case and is managed by the FDIC.
Currently, SVB has about $2.2 billion in cash assets. Due to its ownership stakes in SVB Financial Group, SVB Securities, and SVB Capital, the bank also has cash on board. The now-defunct bank also housed other valuable assets in securities accounts.
The statement states that the approximately $3.3 billion in total principal amount of unsecured notes that make up SVB Group’s funded debt have “only recourse to SVB Financial Group” and have no bearing on SVB Capital or SVB Securities. Additionally, SVB Group owns $3.7 billion in preferred shares.
Before considering alternative strategic options, the bank can preserve most of its value through bankruptcy. In the following days, the bank will also submit more documents concerning the bankruptcy court case. William Kosturos, the Chief Restructuring Officer of SVB Financial Group, stated in the document:
“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.”
Kosturos emphasized that SVB Capital and SVB Securities will continue to run independently and provide customer service.
In addition to the conventional banking system, the ongoing SVB crisis has caused significant uncertainty in some cryptocurrency markets. As a result, numerous firms exposed to the SVB crisis have been affected and have many problems. The Avalanche Foundation also reported that it has exposure to Silicon Valley Bank totaling more than $1.6 million.
After the bank ceased operations on March 8, Circle, the owner of the popular stablecoin USD Coin, had $3.3 billion, or approximately 8% of its reserves, linked to SVB. Due to the situation, USDC momentarily lost its peg, falling to $0.87, before regaining it amid news of the SVB’s resolution.
On March 13, the financial behemoth HSBC made public the acquisition of Silicon Valley Bank U.K. by its subsidiary, HSBC UK Bank, for one British pound, or $1.2. Noel Quinn, the CEO of HSBC Group, stated that the purchase strengthened HSBC’s commercial banking franchise and made “excellent strategic sense” for the company’s operations in the United Kingdom.
