Creditors Want SVB Parent to File for Bankruptcy

A group of creditors for Silicon Valley Bank’s parent are reportedly pushing the company to file for bankruptcy.

The group, most of which bought SVB Financial Group’s bonds ahead of last weekend, now want the company to declare bankruptcy and sell off its non-bank businesses, the Wall Street Journal reported Tuesday (Mar. 14).

According to the report — which cites sources familiar with the matter — the creditor group holds a substantial piece of SVB Financial’s $3.4 billion face value of bonds.

The report also notes that while regulators say the company’s stock is worthless, it also owns some potentially high-value assets: its investment manager SVB Capital, which oversees $9.5 billion, and the investment bank SVB Securities and wealth-management firm SVB Private.

However, these creditors could have to wait, the report says, as the Federal Deposit Insurance Corp. (FDIC) — the bank’s receiver — could argue that the parent company’s assets should be used to boost the bank’s balance sheet before the bondholders get their cut.

Silicon Valley Bank was shut down and taken over by federal regulators last week in one of the largest banking failures in U.S. history.

The FDIC took control of SVB after a run on deposits and spent the weekend scrambling to make sure clients’ uninsured deposits were available. The FDIC has also been trying to find a buyer for the bank after an unsuccessful auction during the weekend.

And while another auction is apparently a possibility, reports emerged Tuesday that Apollo Global Management was seeking backing for its bid to buy SVB, and had talked with Andreessen Horowitz, General Catalyst, Redpoint Ventures and other venture capital (VC) firms for assistance in financing a bid for the assets of the failed bank.

Earlier reports have said some of those same VC firms were working to reclaim parts of SVB to help it keep lending to and investing in tech sector companies.

As PYMNTS noted recently, the bank collapses have been “seismic” for the tech industry. Speaking to PYMNTS’ Karen Webster, Money Lion CEO Dee Choubey noted that the ripple effects of the SVB collapse will be widely felt.

Even if companies didn’t hold deposits with the bank, they were likely to have processed payments through SVB, Choubey said — and MoneyLion had in the past, in fact, processed payments through the fallen bank.

“One of the tragedies is that they actually had a very strong payments process business,” said Choubey.