Silicon Valley Bank parent company files for bankruptcy
Silicon Valley Bank’s parent company filed for Chapter 11 bankruptcy on Friday, a week after the tech-focused bank collapsed in a sudden collapse that raised fears of wider problems in the system global banking.
SVB Financial Group’s filing was widely expected, with much of the company now under the scrutiny of banking regulators. The bank was seized last week by the federal government.
In other developments, the bank, its CEO and its chief financial officer have been targeted in a class action lawsuit that claims the company failed to disclose the risks future interest rate hikes would have on its business.
SVB Financial Group is no longer affiliated with Silicon Valley Bank after the bank was taken over by the Federal Deposit Insurance Corporation. The bank’s successor, Silicon Valley Bridge Bank, was not included in the Chapter 11 filing.
SVB Financial Group’s bankruptcy filing creates a legal battle over the bank’s remaining assets between the holding company’s creditors and regulators seeking to make the depositors whole.
SVB Financial Group estimates that it has approximately $2.2 billion in cash. He also said he held other valuable securities and assets that were being considered for sale.
“The Chapter 11 process will allow SVB Financial Group to preserve value by evaluating strategic alternatives for its valuable businesses and assets,” William Kosturos, chief restructuring officer of SVB Financial Group, said in a statement.
These assets include SVB Capital, the company’s venture capital and private credit fund, and SVB Securities, a regulated broker. Both continue to operate and have funding sources, the company said.
The Wall Street Journal reported that a group of distressed debt investors – mostly hedge funds – bought the bonds of Silicon Valley Bank’s holding company betting there will be proceeds for bondholders. obligations once the bankruptcy process is complete.
The closure of Silicon Valley Bank on March 10 and New York’s Signature Bank two days later brought back memories of the financial crisis that plunged the United States into the Great Recession nearly 15 years ago.
Determined to restore public confidence in the banking system, the federal government decided last weekend to protect all bank deposits, even those that exceeded the $250,000 limit per individual FDIC account.
During the 2008 crisis, the parent companies of failed banks Washington Mutual and IndyMac also filed for bankruptcy within days of their failed operations.