SVB Financial Group, the former umbrella entity of Silicon Valley Bank, has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York to “preserve value.”
Troubled SVB Financial Group has filed a voluntary Chapter 11 bankruptcy filing with the United States Bankruptcy Court to preserve profits.
Announcing the news on March 17, SVB said that funds from its capital, SVB Capital, and broker SVB Securities, as well as funds from sponsoring companies, were not included in the liquidation process. The company will continue to operate as usual, while SVB Groupe Financier evaluates the next steps for its activities.
SVB Financial Group also confirmed that the company is no longer affiliated with Silicon Valley Bank NA or its private banking and wealth management business, SVB Private. The bank’s successor, Silicon Valley Bridge Bank, N.A., operates under the jurisdiction of the Federal Deposit Insurance Corporation (FDIC) and is not included in the 11th Amendment.
According to SVB Group estimates, the company has $2.2 billion in revenue. In addition to the funds and holdings in SVB Capital and SVB Securities, the company has “other valuable savings accounts and other assets”, for which it is also evaluating important options.
The SVB Group paid a debt of about $3.3 billion in total unsecured notes, which is “sole compensation against SVB Financial Group” and has no effect on SVB Capital or SVB Securities, according to the announcement. Group SVB also has $3.7 billion in preferred shares.
SVB Group intends to submit a process to the supervisory court to review the alternative process for SVB Capital, SVB Securities and its other assets, said William Kosturos, Chief Executive Officer of SVB Group. Kosturos stressed that SVB Capital and SVB Securities will continue to operate and serve their clients, led by their independent team.
The current SVB crisis has caused a lot of uncertainty not only in the traditional banking system, but also in some cryptocurrency markets. Circle, the operator of the main stablecoin USD Coin USDC ($1.00), with $3.3 billion, or about 8% of its reserves, was linked to SVB when the bank went bankrupt on March 8. As a result, the USDC briefly withdrew, falling to $0.87 and then recovering in the middle of the news of the SVB decision.
On March 13, the banking giant HSBC announced publicly that its subsidiary, HSBC UK Bank, had acquired Silicon Valley Bank UK for £1 ($1.2). HSBC Group CEO Noel Quinn said the acquisition made “excellent strategic sense” for HSBC’s UK business, strengthening its business banking reputation.
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