The parent of Silicon Valley Bank, seized last week by the U.S., is filing for Chapter 11 bankruptcy protection.
The bankruptcy filling by SVB Financial Group will create a legal battle over the bank’s remaining assets, between the creditors of the holding company and bank regulators who are looking to make depositors whole. SVB Financial Group believes it has approximately $2.2 billion of liquidity. It also said it also has other valuable investment securities accounts and other assets that are being considered for sale.
The Wall Street Journal reported that a group of distressed debt investors — mostly hedge funds — bought up the bonds of Silicon Valley Bank’s holding company in a bet that that there will be some proceeds for bondholders after the bankruptcy process is completed.
SVB Capital is the company’s venture capital and private credit fund. SVB Securities is a regulated broker-dealer. Both continue to operate and have sources of funding, the company said. The shuttering of Silicon Valley Bank last Friday and of New York’s Signature Bank two days later has revived bad memories of the financial crisis that plunged the United States into the Great Recession about 15 years ago.
Over the weekend the federal government, determined to restore public confidence in the banking system, moved to protect all the banks’ deposits, even those that exceeded the FDIC’s $250,000 limit per individual account.
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