SVB Financial Group, the former owner of the failed Silicon Valley Bank, received approval from a U.S. judge on Friday to transfer its assets to creditors and conclude its bankruptcy proceedings.
The bankruptcy restructuring plan includes creating a trust to pursue litigation against the U.S. Federal Deposit Insurance Corporation (FDIC). The FDIC seized $1.9 billion from SVB Financial’s accounts during the 2023 collapse of Silicon Valley Bank, one of the largest failures in U.S. banking history. The dispute over these funds will be addressed in a California federal court.
SVB Financial claims the FDIC should return the cash, as it used a “systemic risk” exemption to protect all deposits at Silicon Valley Bank, including those exceeding the typical $250,000 coverage. However, the FDIC argues the funds were legally seized to offset rescue costs, not to protect the parent company’s accounts.
The litigation outcome will determine the repayment for SVB Financial’s senior bondholders, who are owed $3.3 billion, potentially receiving between 41% and 96% of their claims. Bondholders include MFN Partners, Pacific Investment Management Company, Bank of America Securities, JP Morgan Securities, and King Street Capital.
As part of its restructuring, SVB Financial has also sold assets, including its venture capital business and investment banking unit.