Silicon Valley Bank’s initial parent company, SVB Financial, filed for Chapter 11 protection in a New York bankruptcy court on Friday and will seek a court-supervised reorganization.
The move comes after the Federal Deposit Insurance Corporation (FDIC) took over and shut down Silicon Valley Bank last Friday in what was the second largest banking collapse in U.S. history.
The bankruptcy affects the SVB holding company but not Silicon Valley Bank, which since the FDIC’s takeover is no longer affiliated with SVB Financial.
SVB Financial further said Friday that SVB Securities and SVB Capital—which manages some $9.5 billion in large investments—are not included in the Chapter 11 filing as those businesses are continuing their operations.
SVB Financial believes it has about $2.2 billion of liquidity. Its funded debt is approximately $3.3 billion in aggregate principal amount of unsecured notes. The company also has some $3.7 billion of preferred equity outstanding.
“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,” William Kosturos, chief restructuring officer for SVB Financial Group, said in the statement.
Kosturos also led restructuring efforts for Washington Mutual—the largest-ever U.S. banking collapse—in 2008 amid the financial crisis that sparked the Great Recession.
Days before Silicon Valley Bank’s collapse, it disclosed huge losses that sent its stock price plummeting 60%. The vast majority of the bank’s customers—almost exclusively in the tech industry—had deposits in excess of the FDIC’s $250,000 protection threshold, which led to fears that hundreds of start-ups might lose access to their money and not be able to make payroll.
President Biden on Monday said in a speech from the White House that all deposits that were in the collapsed bank—including those exceeding $250,000—would be protected. He said the fees the bank paid into the FDIC would cover the funds—not U.S. taxpayer dollars.
The Administration has rejected critics’ charges that the federal government’s move is a bank bailout as financial analysts have noted that it’s the depositors—and not the bank itself—who are benefiting from the government’s action.
