7 days ago 2 min read

Breaking: SVB Financial Group Declares Bankruptcy Under Chapter 11

svb-preserve value-bankruptcy-william kosturos-hsbc-usd-usdc

The former parent company of Silicon Valley Bank, SVB Financial Group, has filed for Chapter 11 bankruptcy in the United States. "Preserve value," according to Bankruptcy Court for the Southern District of New York.

In order to preserve value, the troubled SVB Financial Group voluntarily petitioned the United States Bankruptcy Court for a Chapter 11 reorganization under court supervision.

The funds of SVB Capital, its broker-dealer SVB Securities, and the general partner entities' funds are not subject to the bankruptcy proceedings, according to a statement made by SVB on March 17. Although SVB Financial Group continues to investigate strategic alternatives for its companies, the entities will carry on as usual.

Also, SVB Financial Group made clear that it was no longer associated with Silicon Valley Bank N.A. or SVB Private, the bank's private banking and wealth management division. Silicon Valley Bridge Bank, N.A., the bank's successor, is not a party to the Chapter 11 petition and is managed by the Federal Deposit Insurance Corporation (FDIC).

SVB Group estimates that the company has $2.2 billion in liquid assets. The company has "other attractive investment securities accounts and other assets" in addition to cash and its holdings in SVB Capital and SVB Securities, for which it is also considering strategic options.

The release states that the approximately $3.3 billion in total principal amount of unsecured notes that make up SVB Group's financed debt have "sole recourse to SVB Financial Group" and have no bearing on SVB Capital or SVB Securities. Moreover, SVB Group owns $3.7 billion in preferred stock.

The court-supervised procedure will be used by SVB Group to assess strategic options for SVB Capital, SVB Securities, and other assets, according to William Kosturos, chief restructuring officer of SVB Group.

"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.”

Kosturos emphasized that SVB Capital and SVB Securities will continue to run independently and provide client service.

In addition to the traditional banking sector, the ongoing SVB issue has also caused significant uncertainty in various cryptocurrency markets. Once the bank ceased operations on March 8, Circle, the owner of the popular stablecoin USD Coin USDC $1.00, had $3.3 billion, or around 8% of its reserves, linked to SVB. Owing to the circumstances, USDC briefly lost its peg, falling to $0.87, before regaining it amid news of the SVB's resolution.

On March 13, the financial behemoth HSBC made public the acquisition of Silicon Valley Bank UK by its affiliate, HSBC UK Bank, for one British pound, or $1.2. Noel Quinn, the CEO of HSBC Group, stated that the acquisition strengthened HSBC's commercial banking brand and made "great strategic sense" for the company's operations in the United Kingdom.

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