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SVB Financial Group (OTC:SIVBQ), the former parent company of failed Silicon Valley Bank, secured a U.S. judge’s permission on Friday to distribute its assets to its creditors and close its bankruptcy, Reuters reported.
According to the report, the bankruptcy plan contains a provision for the creation of a trust to pursue litigation against the U.S. Federal Deposit Insurance Corporation, which seized $1.9 billion from SVB Financial’s (OTC:SIVBQ) accounts following the bank’s collapse in 2023.
In March 2023, SVB became the biggest U.S. bank failure since the collapse of Lehman Brothers in 2008, triggering a global banking crisis. Shortly after SVB’s insolvency, Signature Bank (OTC:SBNY) failed and Credit Suisse was rescued by UBS (UBS).
The fight over the seized money will unfold in federal court in California, the report said.
SVB Financial (OTC:SIVBQ) has argued for the return of its funds, stating that the FDIC had invoked a “systemic risk” exemption to protect all deposits within Silicon Valley Bank, including accounts with more than the $250,000 that the FDIC typically protects, the report added.
The FDIC has said that it did not intend to offer protection for the bank accounts of the parent company, and that it had legally seized the money to offset its costs in rescuing the bank, the report added.
According to the report, SVB Financial’s senior bondholders, who are owed $3.3 billion, will receive between 41% and 96% of what they are owed, depending on the outcome of the litigation.
The list of bondholders includes MFN Partners, Pacific Investment Management Company, Bank of America Securities, JP Morgan Securities, and King Street Capital, the report stated, citing court documents.
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