Parent company of Silicon Valley Bank files for bankruptcy

Parent company of Silicon Valley Bank files for bankruptcy

Parent company of Silicon Valley Bank files for bankruptcy

The parent company of Silicon Valley Bank filed for Chapter 11 bankruptcy a week after the tech-focused bank failed and was seized by the U.S. government.

The filing from SVB Financial Group on Friday is not a surprise, with much of the company now under the control of U.S. banking regulators. During the 2008 financial crisis, the parent companies of failed banks Washington Mutual and IndyMac — filed for bankruptcy protection in the days after their banking operations failed.

Also, Silicon Valley Bank along with its CEO and its chief financial officer were targeted this week in a class action suit that claims the company didn’t disclose the risks that future interest rate increases would have on its business.

SVB Financial Group is no longer affiliated with Silicon Valley Bank after its seizure by the Federal Deposit Insurance Corporation. The bank’s successor, Silicon Valley Bridge Bank, is being run under the jurisdiction of the FDIC and is not included in the Chapter 11 filing.

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.