By Dietrich Knauth
April 26 (Reuters) - Silicon Valley Bank's former owner
may need to take out a bankruptcy loan amid uncertainty about
the U.S. Federal Deposit Insurance Company's seizure of $2
billion in cash from the company, its attorney said Wednesday.
SVB Financial has about $180 million on hand and is not in
"imminent danger" of running out of cash attorney James Bromley
said at a court hearing before U.S. Bankruptcy Judge Martin
Glenn in Manhattan, who is overseeing the company's Chapter 11
proceedings.
SVB Financial filed for Chapter 11 bankruptcy on March 17
after California regulators shuttered Silicon Valley Bank in
early March and appointed the FDIC as receiver, making it the
largest collapse since Washington Mutual went bust during the
financial crisis of 2008. The company replaced its CEO and CFO
with turnaround specialists last week.
The company has been forced to consider taking out a
bankruptcy loan because the FDIC has not yet said whether it
will return any of the $2 billion seized at the time of the bank
failure, Bromley said. The FDIC has also not fully explained why
the cash was seized, Bromley said.
"There is something fundamentally wrong with taking the
money and not saying why," Bromley said.
FDIC's attorney, Derek Baker, told Glenn that SVB
Financial's bank accounts were properly seized as part of FDIC's
takeover of the failed bank.
The cash is being held as a set-off against the regulator's
costs in stepping in to protect SVB customer deposits, and FDIC
is working to provide more detail about its claims against SVB
Financial, Baker said.
Glenn said he needed more information about the FDIC's
authority to seize cash and how disputes related to the seizure
should be resolved. He directed Baker to report to the court on
those topics within a week.
SVB Financial is also still waiting for the full return of
financial records that were seized as part of the bank takeover.
First Citizens BancShares, which bought the failed bank,
said that it has hired a specialized financial adviser to speed
up the transfer of information necessary to SVB Financial's
bankruptcy case.
(Reporting by Dietrich Knauth in New York, Editing by Alexia
Garamfalvi and Aurora Ellis)
