SVB Financial Group, the former parent company of Silicon Valley Bank, was able to make progress in its bankruptcy case by reaching an agreement with the main creditors.
The media reports that SVB is currently approaching a solution to its financial problems. In the foreseeable future, the company may come out of bankruptcy.
The deal concluded by SVB with the main creditors provides for the creation of a new firm that will own valuable assets, including the venture capital unit SVB Financial, SVB Capital, and potentially tax assets worth several billion dollars.
The media reports that this agreement is preliminary and requires court approval.
SVB Financial Group considered the possibility of selling its venture capital unit. The company refused to implement this intention since the consultants estimated the current value of the specified unit at $572 million. This amount is $55 million more than the largest offer from potential buyers.
SVB’s deal with creditors will also provide an opportunity for Wall Street heavyweights to own stakes in the new company. Davidson Kempner Capital Management, Pacific Investment Management Co. and King Street Capital Management, MFN Partners, Bank of America Securities, and JP Morgan Securities are among the bondholders involved in the negotiation process.
The restructuring deal provides for the transfer of not only venture capital assets but also securities and cash into trust management in the interests of creditors. This proposal is expected to be included in the bankruptcy exit plan. However, creditors should vote for the implementation of this decision.
Creditors still have a major hurdle to overcome. There is currently a dispute with federal regulators over the fate of nearly $2 billion in cash. This is the money that SVB Financial kept on deposit in its own bank at the time of bankruptcy. The Federal Deposit Insurance Corporation (FDIC) claims that the mentioned organization must go through an official agency-controlled process to return the cash. The FDIC rejected the company’s demand for deposits last week, resulting in a trial that will be handled in the district court.
SVB Financial Group filed for bankruptcy in March. At that time, the company announced its intention to maintain its value and was evaluating strategic alternatives for its business, including SVB Capital.
In July, a bankruptcy judge approved the sale of another business of the financial group, an investment bank then called SVB Securities. At that time, Leerink Partners spokesperson stated that the buyers were investing $100 million in the company. This amount includes the payment of $55 million in cash and a fee for the transaction.
William Kosturos, SVB’s Chief Financial Officer for Restructuring, said that keeping SVB Capital within the framework of the reorganization is the best way to maximize its value in the current environment.
According to information contained in court documents, SVB Capital manages investments worth about $10 billion on behalf of approximately 750 limited partner investors, including public pensions.
As we have reported earlier, First Citizens Bank to Woo Startups and Rebuild SVB Business Model.