SVB Financial Group is suing the Federal Deposit Insurance Corp. to recover around $1.9 billion in cash the regulator seized after taking over failed Silicon Valley Bank in March, according to a complaint filed Sunday.
The suit claims the lack of access to funds obstructs SVB Financial from reorganizing, and the account funds — "the core estate asset" — would generate more than $100 million in annual interest for the estate at current rates. If the account funds are not paid immediately, the plaintiff might need to resort to costly and uncertain debtor-in-possession financing, it noted.
SVB Financial, the parent company of Silicon Valley Bank, filed for bankruptcy protection in March, days after the FDIC seized SVB following an outflow of $42 billion in deposits in one day.
The company alleges the FDIC's retention of money violated the U.S. bankruptcy law.
"The Debtor's lack of access to these Account Funds is impeding its ability to reorganize, and causing harm to the Debtor on a continuous basis," the filing said.
The plaintiffs also claim that “immediate receipt” of the funds is essential for the debtor to formulate a plan that maximizes the value of its tax attributes.
The filing asserted that the regulator refused to pay the withheld cash and demanded that any request for payment must go through the FDIC, acting as a receiver for SVB's administrative claims process.
Neither the FDIC nor the FDIC acting as receiver for Silicon Valley Bank has suggested that the money does not belong to the debtor, but the regulator failed to justify its refusal to pay “despite having numerous opportunities,” the filing said.
The issue now is who gets to possess the cash between the two sides — leaving one party to submit a claim to the other over what portion should be rightfully given back, according to the Financial Times.
The filing comes days after a bankruptcy judge signed off on the proposed sale of SVB’s investment-banking division to a management group that includes the business’s founder, Jeff Leerink.
Judge Martin Glenn, in May, refused to approve the deal, saying it would guard Leerink and other executives against any liability associated with SVB’s failure.
