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Today: May 23, 2024
January 10, 2024
1 min read

Ready to Hand Over: SVB Financial’s VC Business to Creditors

TLDR:

  • The bankrupt parent entity of Silicon Valley Bank (SVB Financial) plans to transfer its remaining venture capital operations to a newly established company supported by creditors
  • SVB Financial Group has formulated a restructuring plan with principal creditors, gaining the endorsement of a consortium of banks and investment firms holding over $2.3 billion in SVB Financial’s debt and preferred stock

The bankrupt parent entity of Silicon Valley Bank, SVB Financial, is preparing to hand over its venture capital (VC) operations to a newly established company supported by creditors. SVB Financial Group has formed a restructuring plan with principal creditors, gaining the endorsement of a consortium of banks and investment firms that hold over $2.3 billion in SVB Financial’s debt and preferred stock. This plan comes as SVB Financial battles against the appropriation of almost $2 billion in funds by U.S. regulators.

This restructuring agreement marks the end of SVB Financial’s search for an external buyer for its venture capital segment. SVB Financial’s VC arm, SVB Capital, currently oversees around $10 billion in investments for approximately 750 limited partner investors. The agreement also proposes forming a new corporate body to continue SVB Financial’s legal dispute with the Federal Deposit Insurance Corp (FDIC) regarding the confiscated funds.

The FDIC intervened with Silicon Valley Bank in an effort to prevent a wider banking crisis. This intervention resulted in the FDIC securing all deposits, including those exceeding the legally guaranteed limit of $250,000. SVB Financial argues that its accounts should have been safeguarded under the FDIC’s pledge to protect “all” deposits at the bank. However, the FDIC contends that the funds from SVB Financial could be used to offset the costs incurred in the bank’s rescue.

This restructuring agreement will be integrated into an official bankruptcy plan, which will require approval from a U.S. bankruptcy judge before it can be finalized.

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