SVB’s motion to move funds from Silicon Valley Bank draws objection

By Sarah Lizee

Olympia, Wash., March 21 – SVB Financial Group’s first-day motion seeking authorization to transfer funds from Silicon Valley Bridge Bank, NA to another bank drew an objection on Monday from the Federal Deposit Insurance Corp., according to documents filed with the U.S. Bankruptcy Court for the Southern District of New York.

As background, after the March 10 run on Silicon Valley Bank, the California Department of Financial Protection and Innovation closed the bank and appointed the FDIC as receiver. On March 13, the FDIC announced the creation of Silicon Valley Bridge Bank.

SVB Financial, formerly the parent company of Silicon Valley Bank, filed Chapter 11 on March 17.

The FDIC said that, if the relief is granted, it would effectively permit the debtor to circumvent the FDIC’s exclusive, mandatory claims allowance process and extinguish the FDIC’s statutory right to withhold payment on the debtor’s deposit claims, as well as its contractual and common law rights of setoff.

The FDIC said that while its investigation is just starting out, it is highly likely that some of the funds in the operating account were owned by Silicon Valley Bank, and both generated and used for the bank’s operations, not the debtor’s, given the lack of observance of corporate formalities in the two entities’ day-to-day affairs.

Property, books, records, contracts and personnel were shared by SVB Financial and Silicon Valley Bank, and accounting for their separate interests in the accounts is ongoing, the FDIC said.

“This case involves the statutory rights of the FDIC-R in the second-largest bank failure in United States history,” the FDIC said in the objection.

“Largely due to the way that the debtor structured its business and financial relationships with its bank (SVB) and third parties, the relationships and financial entanglements ... will take time to identify, analyze, quantify and disentangle.

“Much of that work will take place in FDIC-R’s exclusive, mandatory claims process.”

The financial services and bank holding company is based in Santa Clara, Calif. The Chapter 11 case number is 23-10367.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.