Venture Capitalists Circle SVB's Carcass
The first attempt to auction off SVB (or parts of the failed bank) was unsuccessful, but is shrouded with political questions, as The Wall Street Journal reports:
The Federal Deposit Insurance Corp. says it couldn’t find a private buyer for SVB, though a source tells us Treasury and the Federal Reserve favored one.
FDIC Chairman Martin Gruenberg nixed it owing to hostility to bank mergers.
But for venture capital firms - and the feds - if at first you don't succeed, try, try again is the mantra, as The FT reports that several VC firms working on a long-shot plan to preserve parts of Silicon Valley Bank so it can keep serving clients in the technology sector, according to people briefed on the effort.
Since late last week a group of more than a dozen VC firms have been in talks about how to enable SVB to continue lending to, investing in and advising companies and executives in the sector.
Specifically, Bloomberg reports that Apollo Global Management and Blackstone have expressed interest in snapping up a book of loans held by SVB.
The bank had $73.6 billion of loans as of Dec. 31, 2022.
Before pressing ahead with any bid, the group is asking regulators for more information on the state of the bank, according to one of the people.
“It’s still premature but I’m hopeful it could come together in the next few days,” said one of the people involved in the discussions.
The loan portfolio is seen as an attractive buy and was not a contributing factor in the bank run that caused Silicon Valley Bank’s demise, the people said.
“It has a long-established track record in the sector which supports its expertise, conservative underwriting, and better than peer asset quality performance,” ratings agency Moody’s Investors Service said last week as it downgraded the debt of the SVB Financial Group, the bank’s parent company.
The size of the loan book Apollo and Blackstone are interested in couldn’t immediately be determined. Blackstone is also looking at other assets it may purchase from the bank, one of the people said.
“The deal might be wholesale or piecemeal, but it is clear there needs to be financial capital providers that step into the breach... as there are scenarios here where large banks won’t get [to agreements with regulators over the potential liability of buying SVB],” according to a senior executive at a leading venture capital firm directly involved in the discussions.
Other firms involved in discussions, according to The FT's sources, include General Catalyst, KKR, Andreessen Horowitz, Khosla Ventures, and CSFB.