Silicon Valley Bank (SVB) Financial Group said on Friday it filed for a court-supervised reorganization under Chapter 11 bankruptcy protection to seek buyers for its assets, days after its former unit Silicon Valley Bank was taken over by U.S. regulators.
The move to commence bankruptcy proceedings comes as emergency measures to shore up confidence have so far failed to dispel worries about financial contagion.
Shares of big banks fell between 1.5% and 3% in early trading.
Financial stocks have lost over billions of dollars in value since the collapse of Silicon Valley Bank and Signature Bank (SBNY.O) last week, while credit stress has worsened for Wall Street’s biggest banks.
“It is impossible to know if there are other shoes to drop, but I think a good majority of the negative news is out there,” said Art Hogan, chief market strategist at B. Riley Wealth Management.
Californian regulators shuttered Silicon Valley Bank last Friday and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver, making it the largest collapse since Washington Mutual went bust during the financial crisis of 2008.
SVB was forced to sell a portfolio of treasuries and mortgage-backed securities to Goldman Sachs (GS.N) at a $1.8 billion loss after a rise in yields eroded value.
To plug that hole, it attempted to raise $2.25 billion in common equity and preferred convertible stock but spooked clients pulled out deposits that led to $42 billion of outflows in a day.
Earlier this week, the company said it was planning to explore strategic alternatives for its businesses including the holding company, SVB Capital and SVB Securities.
SVB Securities and SVB Capital’s funds and general partner entities are not included in the Chapter 11 filing, the company said on Friday, adding it planned to proceed with the process to evaluate alternatives for the businesses, as well its other assets and investments.
Reuters reported on Wednesday that the parent company was exploring bankruptcy protection to sell its assets.
The company said on Friday it has about $2.2 billion of liquidity. It had $209 billion in assets at the end of last year.