SVB Financial files Chapter 11 following bank subsidiary’s collapse

By Sarah Lizee

Olympia, Wash., March 17 – SVB Financial Group filed a voluntary petition for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York, according to a press release on Friday morning.

This follows the recent collapse of former subsidiary Silicon Valley Bank, which was taken over by the Federal Deposit Insurance Corp. after a run on the bank. Silicon Valley Bank is the second largest bank-fail in U.S. history, behind Washington Mutual in 2008.

Similar to SVB’s case, parent company Washington Mutual Inc. filed Chapter 11 after its Washington Mutual Bank subsidiary was closed by regulators.

Alvarez & Marsal’s William Kosturos, who had stepped in as chief restructuring officer for Washington Mutual after the bank subsidiary’s collapse, has been appointed CRO of SVB Financial.

“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,” Kosturos said in the Friday morning release.

Notably, SVB Securities and SVB Capital’s funds and general partner entities are not included in the filing and continue to operate in the ordinary course as SVB Financial explores strategic alternatives for those businesses.

SVB Securities (a regulated broker-dealer) and SVB Capital (a venture capital and private credit fund platform with “deep roots” in the innovation economy) are separate legal entities.

SVB Financial believes it has about $2.2 billion of liquidity. In addition to cash and its interests in SVB Securities and SVB Capital, the company says it has other valuable investment securities accounts and other assets for which it is also exploring strategic alternatives.

SVB Financial said its funded debt is about $3.3 billion principal amount of unsecured notes and the group also has $3.7 billion of preferred equity outstanding. For the sake of clarity, there is no claim for the notes against SVB Securities or SVB Capital.

The company listed 1,000 to 5,000 creditors in its petition.

The court-supervised process is being led by a five-member restructuring committee appointed by the SVB board or directors.

Centerview Partners LLC is assisting the restructuring committee with the strategic alternative process, which is already underway.

Any sale process will be conducted through the Chapter 11 proceeding and subject to court approval.

SVB Financial Group plans to file customary first-day motions with the bankruptcy court that, among other things, seek authorization to continue the operations of SVB Financial Group in the ordinary course of business as soon as a hearing can be scheduled.

Additional documents relating to the bankruptcy court proceeding will be filed in the coming days.

Noted in the press release, SVB Financial Group is no longer affiliated with Silicon Valley Bank, NA, or the bank’s private banking and wealth management business, SVB Private. The bank’s successor, Silicon Valley Bridge Bank, NA is operating under the jurisdiction of the FDIC and is not included in the filing.

Centerview Partners is proposed financial adviser, Sullivan & Cromwell LLP proposed legal counsel and Alvarez & Marsal proposed restructuring adviser to SVB Financial Group as debtor-in-possession.

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

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