Ajit Karn
SVB Financial Group announced on Friday that it has filed for court-supervised reorganisation under Chapter 11 bankruptcy protection in order to seek purchasers for its assets, days after its former subsidiary Silicon Valley Bank was seized by U.S. regulators.
The decision to initiate bankruptcy proceedings was made because emergency measures to bolster confidence have thus far failed to allay fears of a financial contagion. Friday’s premarket trading saw declines of between 1.5% and 2% in the shares of major U.S. banks.
Silicon Valley Bank was shut down by Californian regulators on Friday, making it the biggest bank failure since the collapse of Washington Mutual during the 2008 financial crisis.
Due to an increase in yields, the tech lender was forced to sell a portfolio of treasuries and mortgage-backed securities to Goldman Sachs at a loss of $1.8 billion.
To fill this void, the bank attempted to raise $2.25 billion in common equity and preferred convertible stock, but clients withdrew $42 billion in deposits in a single day.
The defunct lender announced earlier this week that it would investigate strategic alternatives for its businesses, including the holding company, SVB Capital, and SVB Securities.
The funds and general partner entities of SVB Securities and SVB Capital are not included in the Chapter 11 petition, the company stated on Friday, adding that it would continue with the process to evaluate alternatives for the businesses, as well as its other assets and investments.
Reuters reported on Wednesday that the parent company was considering filing for insolvency in order to sell assets.
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The company reported approximately $2.2 billion in liquidity on Friday. At the end of last year, it held $209 billion in assets.
