A JUDGE approved SVB Financial Group’s restructuring deal but dealt the company a setback in its fight with federal regulators to recover about US$2 billion it had at its Silicon Valley Bank (SVB) subsidiary when it collapsed last year.
Judge Martin Glenn on Friday (Aug 2) backed SVB’s plan to distribute assets to creditors and preferred equity holders, largely resolving its bankruptcy. The group includes funds managed by Citadel Advisors, Hudson Bay Capital, King Street Capital Management and other Wall Street heavyweights, according to court documents.
But the ruling leaves unresolved its fight with the Federal Deposit Insurance Corporation (FDIC) over roughly US$1.93 billion in deposits held by the former SVB. Judge Glenn rejected the former bank parent’s argument that the Chapter 11 should extinguish the FDIC’s right to set off amounts owed to SVB.
Setoff rights allow the FDIC to reduce liabilities it may owe SVB. Judge Glenn said he would not consider the merits of the FDIC’s setoff rights, saying that analysis should be made by district courts overseeing that dispute.
A representative for SVB Financial declined to comment on Monday.
SVB sought court protection shortly after regulators took over Silicon Valley Bank in March 2023. In Chapter 11, the former bank parent forged a restructuring plan and sold assets to repay creditors. The company sold its investment banking arm for US$100 million and later sold its venture capital business, SVB Capital.
SVB is holding on to some assets, including equities-research firm MoffettNathanson which will be owned by a restructured company out of Chapter 11, according to court documents. BLOOMBERG
