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Written by Dietrich Knaut
NEW YORK (Reuters) – The parent company of a bankrupt Silicon Valley bank said on Tuesday it plans to hand over its remaining venture capital business to creditors while it continues to fight the seizure of nearly $2 billion in cash by U.S. regulators. This was revealed in court documents filed in.
SVB Financial Group has reached a reorganization agreement with its major creditors, helping a consortium of banks and investment funds that hold more than $2.3 billion in SVB Financial’s combined debt and preferred stock investments, according to documents filed in Manhattan bankruptcy court. Is receiving.
The company filed for bankruptcy in March following the failure of Silicon Valley Bank, making it the third-largest bank failure in U.S. history. SVB Financial is using bankruptcy to sell assets, spinning off its investment banking division in June and exploring the possibility of selling its venture capital and credit investment businesses.
The coalition supporting the transaction includes MFN Partners, Pacific Investment Management Company, Bank of America Securities, JPMorgan Securities, and King Street Capital, which is responsible for approximately 50% of SVB Financial’s first-priority notes. It owns 48%.
The reorganization agreement is expected to be incorporated into a formal bankruptcy plan later this month and must be approved by a U.S. bankruptcy judge before it becomes final.
The company’s venture capital business, SVB Capital, manages about $10 billion in investments on behalf of about 750 limited partner investors, including public pensions, that have provided capital to investment funds, according to court documents.
The reorganization agreement would also create a new legal entity to continue SVB Financial’s lawsuit with the Federal Deposit Insurance Corporation (FDIC) over seized cash.
When the FDIC acquired Silicon Valley Bank, it sought to avert a broader banking crisis by completely backstopping all of the bank’s deposits, including deposits over $250,000 that are guaranteed by law. did.
SVB Financial said the FDIC should have included its own accounts when it moved to protect “all” bank deposits. The FDIC disagreed and said SVB Financial’s cash could be seized to cover the cost of bailing out the failed bank.
(Reporting by Dietrich Knauth; Editing by Alexia Garamfalvi and Bill Berkrot)
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