SVB Financial Files for Chapter 11 Bankruptcy Protection

Silicon Valley Bank’s parent company filed for bankruptcy, facilitating the sale of its remaining assets after the technology-focused bank at its core was seized by federal regulators.

SVB Financial Group filed for Chapter 11 protection in New York bankruptcy court on Friday, the largest bankruptcy filing due to a bank failure since Washington Mutual Inc.
in 2008.

Silicon Valley Bank, the technology-focused lender and primary business of SVB Financial, was taken over by federal regulators after it was crippled by a stampede on exits from depositors. The Federal Reserve stepped in to make savers healthy and reassure markets, though a number of other US regional banks have seen their credit ratings downgraded and depositors bringing in money.

Silicon Valley Bank, now operating as Silicon Valley Bridge Bank NA under the control of the Federal Deposit Insurance Corp., is not part of the Chapter 11 filing.

Bankruptcy provides a court-supervised process to help the parent company find new owners for its business units that are not under federal control. The other companies include SVB Capital, an investment manager that oversees $9.5 billion in funds on behalf of outside investors, as well as an investment bank, SVB Securities, and an asset management company, SVB Private, according to the securities filings.

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SVB Financial Group announced in a statement on Friday that Silicon Valley Bank and SVB Private are no longer affiliated with the parent company.

William Kosturos, the parent company’s chief restructuring officer, said in a statement that he is working on ways to maximize recoverable value for SVB Financial Group and Silicon Valley Bridge Bank stakeholders.

SVB Financial Group has publicly traded shares listed on the Nasdaq exchange that have not traded since March 9. It also has more than $3 billion in bond debt and nearly $4 billion in preferred stock, which trades at distressed levels. since the bank has been placed under guardianship.

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Hedge funds and other asset managers have piled into bonds issued by SVB Financial, even though US government officials have warned investors in the bank are likely to be wiped out. A group of bondholders, including Centerbridge Partners, Davidson Kempner Capital Management LP and Pacific Investment Management Co., is betting on collecting the proceeds from the sale of the company’s private wealth and other parts, The Wall Street Journal reported.

Financial Advisor PJT Partners Inc. and law firm Davis Polk & Wardwell LLP are advising the bondholder group, people familiar with the matter said. SVB Financial is working with Centerview Partners LLC as financial advisor, Sullivan & Cromwell LLP as legal counsel and Alvarez & Marsal as restructuring advisor, according to the company statement.

Friday’s bankruptcy filing may also help SVB Financial’s directors and officers obtain waivers from any civil lawsuits that creditors or shareholders may bring against them for alleged mismanagement of the company.

When assets are sold through bankruptcy, the proceeds often flow to creditors. However, investors are weighing the risk that SVB Financial may need to help cover losses at Silicon Valley Bank, which regulators have not disclosed.

It is not uncommon for a holding company to file for bankruptcy after a bank it owns has gone into receivership. Washington Mutual filed for Chapter 11 protection after its subsidiary, Washington Mutual Bank, collapsed in 2008, the largest bank failure in US history. Washington Mutual Bank was acquired by federal regulators and later sold to

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JPMorgan Chase & Co.

Write to Alexander Saeedy at

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