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July 5, 2023 – The Court hearing the SVB Financial Group case issued an order: (i) approving the sale of the Debtor’s interests in SVB's investment banking business (“SVB Securities*”) to Saffron Buyer LLC**, an SPV entity created by certain management investors and funds managed by private equity house The Baupost Group, L.L.C. (together, the “Buyer") and (ii) authorizing the Debtor to enter into an Interest and Asset Purchase Agreement memorializing the transaction [Docket No. 393, which attached the June 17, 2023 Interest and Asset Purchase Agreement, or "Purchase Agreement," at Exhibit A].
*Non-Debtor SVB Securities Holdings LLC (‘SVB Securities Holdings’), a wholly-owned subsidiary of the Debtor, together with its non Debtor subsidiaries, provides investment banking services across the healthcare and technology sectors….SVB Securities has its own management, employees and capital separate from the Debtor. The legal entities which comprise SVB Securities are separate legal entities, distinct from the Debtor, and are not included as debtors in this Chapter 11 Case.
The consideration for the SVB Securities includes (i) cash of $55.0mn, (ii) the Subordinated Debt Payoff Amount (@$26.0mn), (iii) the assumption of Transferred Liabilities, including "significant deferred compensation obligations," (iv) the "Synthetic Equity Consideration," representing a 5% equity interest in the direct parent of
the Buyer and (v) any Estimated MN Distribution payable at closing.
The Buyer's $55.0mn of cash is to come from equity infusion of $100.0mn (Baupost) and $30.0mn (management team), with the balance providing the rebrabded Leerink Partners with working capital and some indication of the value of the Synthetic Equity Consideration.
In a June 18th announcement heralding the now approved sale, the Debtor noted that the management team was led by Jeff Leerink, SVB Securities' Chief Executive Officer and Founder and that SVB Securities would be rebranded, or perhaps more accurately "re-rebranded," as Leerink Partners. In 2019, the Debtor purchased (for $280.0mn) the then named investment bank Leerink Partners and rebranded it as SVB Securities.
The press release provides: "Under the terms of the purchase agreement, the bidder group will acquire the investment banking business for a combination of cash, repayment of an intercompany note, the assumption of certain liabilities (including significant deferred compensation obligations) and a 5% equity instrument in the buyer entity. MoffettNathanson LLC, a sell-side research business owned by SVB Financial Group, is not included in the transaction and will remain part of SVB Financial Group."
Turning to the transactional mechanics, the Purchae Agreement provides that the Debtor will (A) cause SVBS Holdings to sell and assign to Buyer (1) 100% of the issued and outstanding membership interests of each of the Company Broker-Dealer and MEDACorp (such interests collectively, the “Interests”) and (2) certain assets of SVBS Holdings used in the operation of, or otherwise related to, the business of the Companies, and (B) sell and assign to Buyer the Debtor’s right, title and interest in and to the assets, properties and rights of every kind of the Debtor of and to the (1) Acquired Leases, (2) Acquired IP, (3) Assumed Seller Plans, (4) Acquired Claims and (5) any Assigned Debtor Contract identified and assigned in accordance with the applicable provisions of the Purchase Agreement after the Execution Date…
Bidding Procedures Motion
The motion [Docket No. 137] states, “Since the filing of this Chapter 11 Case, the Debtor has proceeded with its continued operations of, and exploration of strategic alternatives for, its SVB Securities and SVB Capital businesses, in order to preserve and maximize recoverable value for the benefit of stakeholders.
…the Debtor seeks approval of bid procedures for, and the sale of its SVB Securities business as described below, including any associated contracts, rights or other property of the Debtor (such business or portion thereof, ‘SVB Securities’; where applicable, such defined term shall be limited to assets of the Debtor that are to be sold, e.g., the Debtor’s equity interests in non-debtor subsidiaries)….
Since the announcement of the Debtor’s review of its strategic alternatives prior to the commencement of this Chapter 11 Case, numerous parties have expressed interest in acquiring SVB Securities. Considering the interest expressed by potential acquirors in SVB Securities and the value of the business, the Debtor has determined that pursuing one or more sales (the ‘Sale(s)’) of SVB Securities (or a portion thereof) is important to maximize the value of the Debtor’s estate. No final decision has been made to sell any portion of SVB Securities, and any Sale will be subject to the approval of the Restructuring Committee or the Board as well as the approval of the Court.”
On March 16, 2023, SVB Financial Group (NASDAQ: SIVB; “SVB” or the “Debtor”) filed for Chapter 11 protection noting estimated assets between $1.0bn and $10.0bn; and estimated liabilities between $1.0bn and $10.0bn.
Prior to March 10, 2023, SVB Financial Group was owned and operated Silicon Valley Bank (the “Bank”), a state-chartered bank. On March 10, 2023, the Debtor’s wholly owned subsidiary, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation was appointed as receiver. As a result, the Debtor is no longer the parent company of the Bank.
About the Debtor
According to the Debtor: “SVB Financial Group (Nasdaq: SIVB) is the holding company for SVB Capital and SVB Securities….SVB Financial Group is a financial services company focusing on the innovation economy, offering financial products and services to clients across the United States and in key international markets. Prior to March 10, 2023, SVB Financial Group owned and operated Silicon Valley Bank, a state-chartered bank.”
In its last 10-K (and notably prior to March 10th) the Debtor provided: “SVB Financial Group (‘SVB Financial’) is a diversified financial services company, as well as a bank holding company and a financial holding company. SVB Financial was incorporated in the state of Delaware in March 1999. Through our various subsidiaries and divisions, we offer a diverse set of banking and financial products and services to clients across the United States, as well as in key international innovation markets. For nearly 40 years, we have been dedicated to helping support entrepreneurs and clients of all sizes and stages throughout their life cycles, primarily in the technology, life science/healthcare, private equity/venture capital and premium wine industries.
We offer commercial and private banking products and services through our principal subsidiary, Silicon Valley Bank (the ‘Bank’), which is a California state-chartered bank founded in 1983 and a member of the Federal Reserve System. The Bank and its subsidiaries also offer asset management, private wealth management and other investment services. In addition, through SVB Financial’s other subsidiaries and divisions, we offer investment banking services and non-banking products and services, such as funds management and M&A advisory services. We focus on cultivating strong relationships with firms within the private equity and venture capital community worldwide, many of which are also our clients and may invest in our corporate clients.
As of December 31, 2022, on a consolidated basis, we had total assets of $211.8 billion, total investment securities of $120.1 billion, total loans, amortized cost, of $74.3 billion, total deposits of $173.1 billion and total SVB Financial stockholders’ equity of $16.0 billion.
Headquartered in Santa Clara, CA, we operate in key innovation markets in the United States and around the world.”
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