SVB Financial Group and Creditors Aim to Form New Company

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.

This development brings the company closer to resolving its financial challenges and potentially emerging from bankruptcy, Bloomberg reported Tuesday (Jan. 9).

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, according to the report.

This proposal is still tentative and requires court approval, the report said.

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, per the report.

This deal also presents an opportunity for Wall Street heavyweights to own stakes in the new entity, according to the report. Firms like Davidson Kempner Capital Management, Pacific Investment Management Co. and King Street Capital Management are 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, the report said. This proposal will need to be incorporated into a bankruptcy-exit plan, subject to a vote by the creditors.

However, a major obstacle remains for the creditors, per the report. 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, according to the report. The agency denied the company’s claims for the deposits last week, leading to a legal battle that will be handled in district court.

SVB Financial Group filed for bankruptcy in March, saying it wanted to preserve value as it evaluates strategic alternatives for its businesses, including SVB Capital.

In July, a bankruptcy judge approved the sale of another of its businesses, its investment bank then called SVB Securities, to its managers.

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