The Baupost company and SVB Financial Group announced an agreement had been reached to sell its investment banking division to a company led by some of its own senior bankers, including Jeffrey Leerink.
According to court documents filed in connection with the sale, the buyers will make a $55m cash payment and settle a $26m debt owed by SVB Financial Group.
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Additionally, the buyers will take on the debt associated with deferred banker compensation and permit SVB Financial Group to retain 5% of the investment bank’s stock.
Since Silicon Valley Bank collapsed earlier this year and authorities in the US took over its deposit-taking operations, the unit, known as SVB Securities, has been for sale.
This is because Silicon Valley Bank’s unsuccessful capital raise sent tremors throughout the financial services industry.
The take over
The division will once again use a name that was used four years ago, Leerink Partners, as reported by the Financial Times.
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By GlobalDataIn an effort to support its expanding investment banking franchise, SVB Financial purchased the healthcare-focused consultancy firm for $280m in 2019.
The court presiding over SVB Financial’s bankruptcy procedure must still approve the takeover before it can proceed.
The equities research company Moffett Nathanson, which SVB Financial had acquired in 2021, will not be purchased by the buyout group.
Leerink, who will serve as chair and chief executive of the company, said: “The management team and I are excited to return to our heritage of owning and leading the premier healthcare investment bank and relaunching the business under the trusted Leerink Partners brand.’’
Baupost partner Josh Greenhill stated that the hedge fund has been a client of Leerink and SVB “for many years. We know first-hand that, when it comes to advisory, trading or research in the healthcare and biopharma industry, no one is better than Jeff”.
“When we got the chance to back them, we jumped at it,” he added.
SVB Financial Group disintegration
The parent holding company of Silicon Valley Bank, which was taken over by the FDIC during a $42bn run on customer accounts, filed for bankruptcy in March.
The investment bank and an asset management company are both part of SVB Financial Group.
The holding company’s $2bn in cash on hand, as well as the value of the tax savings from operating losses, will be utilised to repay bondholders and preferred investors.
They have $7bn in claims total.
The securities of SVB Financial Group are now owned by a number of debt investors.
Liquidation
there has been a running dispute between SVB and the FDIC over the group’s cash on deposit at the dissolved bank that is now in the regulator’s custody.
Since SVB’s downfall and the bankruptcy of its holding company, other businesses have been competing for the institution’s top talent.
A lawsuit has been filed by First Citizens Bank in North Carolina, the organisation that purchased SVB from the FDIC, over HSBC’s hiring of 40 SVB commercial bankers who are headquartered in the US.
HSBC recently acquired SVB’s UK commercial banking unit.
SVB Securities has also employed 11 software investment bankers for Moelis & Co, a boutique advising business.
The fall of SVB and a number of other banks in 2022, which came after the Federal Reserve decided to aggressively raise interest rates in an effort to reduce inflation, put the US financial system to the test.
However, the rapid rate of interest rate increases decreased the value of government bonds, which were regarded as one of the world’s safest assets by banks like SVB.
A thorough re-evaluation of the risks that interest rates represent to banks’ portfolios of assets has been driven by the losses that banks experienced when holding US Treasuries.
