Now collapsed SVB's parent files for bankruptcy as Biden calls for stiffer penalties
Thought you guys were into fail fast, fail often?
SVB Financial Group, parent to the imploded Silicon Valley Bank (SVB), has filed for Chapter 11 bankruptcy protection less than a week after the top tech bank imploded.
In a statement on Friday, SVB Financial Group said it had filed a petition for court-supervised reorganization under Chapter 11 in the Southern District of New York.
The filing would allow it to explore selling its SVB Security brokerage biz and SVB Capital investment platform company. That is to say, it'll be able to pick out the bits that are still viable and flog them off.
"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," said SVB Financial Chief Restructuring Officer William Kosturos.
At the time of the filing, the company said it has approximately $2.2 billion of liquidity, in addition to cash and interests held by SVB Capital and Securities. Those divisions, the defunct bank notes, are exploring "strategic alternatives" beyond Chapter 11. SVB Financial Group claims approximately $3.3 billion in aggregate funded debt, and about $3.7 billion of preferred equity outstanding.
While the group has already sold off its UK arm to HSBC for a single British pound, the company notes that any potential sales within the US will be conducted through the Chapter 11 bankruptcy proceedings and subject to court approval.
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The filing comes exactly seven days after SVB's collapse and subsequent take over by the Federal Deposit Insurance Corporation (FDIC), which insures deposits up to $250,000.
While this might be reassuring for most. SVB wasn't your typical bank. Once a favorite among venture capitalists and tech startups, it counted around half of US venture-backed tech and life sciences companies as its customers.
It's reported that the vast majority of the bank's customers had deposits well in excess of FDIC protections. This caused something of fervor last week as companies reeled over the prospect of losing potentially massive sums of money in the collapse.
However, last weekend the Treasury Secretary Janet Yellen approved measures that allowed the FDIC to protect customer's deposits in their entirety, with the exception of shareholders and certain unsecured debt holders which would not receive protections.
In a joint statement, the Treasury Department and Federal Reserve emphasized that none of the losses would be borne by taxpayers.
Even so, the bank's failure continues to have ripple effects throughout the broader financial industry. On Friday, US President Joe Biden called on Congress to enact stiffer penalties on banks that mismanage their customer's funds.
"When banks fail due to mismanagement and excessive risk, it should be easier for regulators to claw back compensation from executives, to impose civil penalties, and to ban executives from working in the banking industry again," the US president said in a statement.
"Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions' failing." ®