SVB Financial Group stuck in bankruptcy stalemate

“There’s a category of material that the FDIC claims to have some rights over which the debtor also believes is its property,” Jim Bromley, an attorney representing SVB Financial, said during a bankruptcy hearing on Wednesday. First Citizens Bank’s purchase of SVB’s banking operations last month has complicated negotiations, he said.

US Bankruptcy Judge Martin Glenn expressed repeated concern over the slow pace of the case, especially given the company’s limited cash.

“This process has got to move along,” Glenn said in the hearing Wednesday. “It was clear from the first day hearing that liquidity is limited and it needs to move forward rapidly,” Glenn said.

SVB Financial is negotiating with both the FDIC and First Citizens in order to obtain the records at issue and is close to signing a non-disclosure agreement that will aid the exchange, Bromley said.

Siphoned Cash

SVB Financial and its bondholders are still waiting to see whether it will get back $2 billion the FDIC seized from the holding company before its bankruptcy filing. Still, Bromley said the company isn’t in “imminent danger” and has $180 million on hand.

A lawyer for the FDIC said the agency is still determining what potential “set-off” rights, or claims, the agency might have against SVB Financial. Judge Glenn ordered the FDIC to file a statement that explains the agency’s authority to withhold the $2 billion within a week.

“I’ve been asking this question basically since day one and haven’t received any answers,” Glenn said.

The bankruptcy is SVB Financial Group, 23-10367, US Bankruptcy Court for the Southern District of New York.

© 2023 Bloomberg