SVB Financial Group, the parent company of Silicon Valley Bank, has filed for Chapter 11 bankruptcy one week after its subsidiary failed and was seized by U.S. regulators.
The filing comes after SVB Financial was targeted by shareholders with a class action lawsuit Monday, alleging the company did not disclose how future interest rate hikes could potentially impact the business.
The company said in a statement that SVB Securities and SVB Capital are not included in the bankruptcy filing and will continue to operate while the company explores "strategic alternatives."
What led to the collapse of Silicon Valley Bank and others?
Like any other bank, it operated by taking a portion of deposits and creating loans — but this only works if there's enough deposited at once.
"The Chapter 11 process will allow SVB Financial Group to preserve value as it evaluates strategic alternatives for its prized businesses and assets, especially SVB Capital and SVB Securities," said William Kosturos, Chief Restructuring Officer for SVB Financial Group. "SVB Capital and SVB Securities continue to operate and serve clients, led by their longstanding and independent leadership teams."
SVB Financial has an estimated $2.2 billion of liquidity, approximately $3.3 billion in debt, and $3.7 billion in outstanding preferred equity, according to the statement.
The news of Silicon Valley Bank's failure sent shockwaves through the tech industry, as it was the nation's 16th largest bank and had been a key financial conduit for several tech startups.
The bankruptcy filing by SVB Financial will now create a legal battle over how the bank's remaining assets will be handled.
The filing was made with the U.S. Bankruptcy Court for the Southern District of New York.
