NEW YORK – The former owner of Silicon Valley Bank (SVB), seized earlier in March by regulators, will need to wait, possibly for several months, to find out if it can get back about US$2 billion (S$2.67 billion) in cash that it would need to repay bondholders and other creditors.
SVB Financial Group won provisional court approval on Tuesday to spend only a fraction of the cash the company claims federal regulators must return.
What happens with the rest of the money will need to be decided in the coming months, with lawyers for bondholders owed more than US$3.3 billion saying they are concerned that the Federal Deposit Insurance Corp (FDIC) will try to keep the cash.
The FDIC’s decision to lock down the US$2 billion “creates jeopardy” in the bankruptcy case, said Mr Tom Lauria, a lawyer representing a large bondholder, Appaloosa.
“It seems to be a more urgent issue than a latent one in the context of this case,” Mr Lauria told US bankruptcy judge Martin Glenn during a hearing in federal court in Manhattan.
Under FDIC receivership rules, it can take months for the agency to decide whether the money will be returned and then years if that decision is appealed, lawyers said during the hearing.
The claims process could be resolved “some time in the next century”, Judge Glenn joked.
The dispute over the US$2 billion pits the mission of the FDIC – returning money to depositors – against the priorities of bankruptcy, which is to repay creditors like the bondholders, who hold big claims against SVB.
The FDIC may argue it is a creditor in the bankruptcy case and file a claim that competes with the bondholders.
Mr Lauria argued that any fight over the US$2 billion should happen in bankruptcy court.
“The FDIC seems to believe they can resolve their claims away from this court,” he said.
SVB has worked out a number of minor disputes about sharing information and allowing its former employees, who now work for the FDIC-controlled bridge bank, to cooperate with the bankrupt holding company, SVB lawyer James Bromley said in court.
But the main question is what happens to the US$2 billion, he said. BLOOMBERG
