SVB Customers in Asia Still Stuck With Outstanding Loans

Silicon Valley Bank customers in Asia are reportedly facing dual headaches following the lender’s collapse.

These customers had their deposits seized by the Federal Deposit Insurance Corp. (FDIC) and — as The Wall Street Journal (WSJ) reported Monday (June 19) — still have outstanding loans with First Citizens Bank.

Silicon Valley Bank (SVB) failed in March and was taken over by the FDIC, which later auctioned off its U.S. customer accounts, branches and loans to First Citizens .

But that deal didn’t include SVB’s Cayman Islands branch, the WSJ said, which had deposits from the bank’s clients throughout Asia, including venture capital and private equity firms, whose deposits weren’t protected, and were drained by the FDIC.

And some of those firms had drawn on credit lines tied to their SVB accounts, with those loans among the assets sold to First Citizens, customers of the bank told the WSJ.

The funds are now under pressure to repay those short-term loans, but the money that they had earmarked to repay the debt was in the Cayman bank accounts, the customers said.

The credit lines, which were known as capital-call credit facilities, were originally provided by SVB to many venture capital and private equity funds when their deposit accounts were set up.

Some customers told the news outlet they have asked First Citizens if their loans can be set off with the deposits that they had in their Cayman accounts.

A First Citizens spokeswoman told the WSJ a set-off “isn’t legally possible in this situation” because First Citizens owns the capital-call lines while the Cayman deposits were with the SVB holding company SVB Financial Group.

The customers also said First Citizens has informed some Asian funds that it wasn’t opposed to giving them more time to repay their loans.

The news comes one day after a group led by the CEO of SVB Securities — another SVB offshoot — announced plans to buy the company from SVB Financial Group. The investment bank will be rebranded as Leerink Partners and will focus on healthcare.

SVB Financial Group filed for bankruptcy in March, one week after SVB was seized by regulators. The Chapter 11 filing did not include SVB Securities and SVB Capital’s funds and general partner entities, the company noted at the time.

Meanwhile, the FDIC is preparing to sell off SVB’s German business , with assets up for sale including loan balances of $460 million and commitments for a further $494 million of lending.