TLDR:
- SVB Financial Group has reached a deal with key creditors as part of its bankruptcy case.
- The deal involves the formation of a new company that would hold valuable assets such as SVB Financial’s venture capital arm, SVB Capital, and potentially billions of dollars in tax attributes.
SVB Financial Group, the former parent company of Silicon Valley Bank, has made progress in its bankruptcy case by reaching a deal with key creditors, bringing the company closer to resolving its financial challenges and potentially emerging from bankruptcy. The deal involves the formation of a new company that would hold valuable assets such as SVB Financial’s venture capital arm, SVB Capital, and potentially billions of dollars in tax attributes. This proposal is still tentative and requires court approval. SVB Financial Group had previously considered selling its venture capital unit but decided against it as advisers estimated its present value to be as high as $572 million, which is $55 million more than the best bid received. This deal also presents an opportunity for Wall Street heavyweights to own stakes in the new entity, with firms like Davidson Kempner Capital Management, Pacific Investment Management Co., and King Street Capital Management among the bondholders involved in the negotiations. In addition to the venture capital assets, the restructuring deal includes placing other assets such as cash and securities into a trust for the benefit of creditors. However, a major obstacle remains for the creditors as there is an ongoing dispute with federal regulators regarding the fate of nearly $2 billion in cash that SVB Financial had on deposit at its own bank when it faced failure. The Federal Deposit Insurance Corp. (FDIC) argues that SVB Financial must go through a formal process controlled by the agency to recover the money, leading to a legal battle that will be handled in district court. SVB Financial Group filed for bankruptcy in March and has been evaluating strategic alternatives for its businesses, including SVB Capital.
