SVB Financial to sell investment banking unit to management team

The firms said on Sunday that SVB Financial Group has reached a deal to sell its investment banking division to a group led by some of its top bankers, including Jeffrey Leerink, as well as a hedge fund, Baupost Group.

According to court papers filed with the transaction, the buyers will pay $55 million in cash and pay down $26 million of SVB Financial Group’s debt. The buyers will also assume deferred banker compensation liabilities and allow SVB Financial Group to hold 5 percent of the investment bank’s equity.

The entity, known as SVB Securities, has been on the block since the failed Silicon Valley bank earlier this year, when its forfeited capital sent tremors through the banking industry and prompted regulators in the US to investigate its deposit-taking operations. inspired to handle.

The division will be renamed Leerink Partners, returning to the brand that existed four years ago. SVB Financial buys health-focused advisory business $280 million in 2019 as it sought to strengthen its growing investment banking franchise.

The acquisition still requires a sign off from the court overseeing SVB Financial’s bankruptcy process. The buyout group will not acquire MoffettNathanson, a leading sellside equity research firm that SVB Financial acquired in 2021.

“The management team and I are excited to return to our legacy of owning and leading a leading healthcare investment bank and to relaunch the business under the trusted Leerink Partners brand,” Leerink said.

SVB Financial Group, the parent holding company of Silicon Valley Bank, filed for bankruptcy in March after SVB was taken over by the FDIC over $42 billion in customer deposits. SVB Financial Group includes an investment bank as well as an asset management business.

Proceeds from the asset sale, along with value from the holding company’s $2bn cash balance and tax benefits from operating losses, will be used to pay bondholders as well as preferred stockholders. Together they have claims of $7bn.

Several prominent distressed-debt investors have accumulated positions in the securities of SVB Financial Group. The bankruptcy case featured an ongoing battle between SVB and the FDIC over the group’s cash on deposit at the failed bank controlled by the regulator.

Since the collapse of SVB and the bankruptcy of its holding company, rival companies have been seeking to recruit top employees from the California institution. HSBC, which acquired SVB’s UK commercial banking unit, separately hired 40 US-based SVB commercial bankers, a move that prompted a lawsuit from First Citizens Bank, the North Carolina institution that acquired SVB, from the FDIC. Have done Boutique advisory firm Moelis & Co has also hired 11 software investment bankers from SVB Securities.

Josh Greenhill, partner at Baupost, said the hedge fund has been a client of Leerink and SVB for many years. We know firsthand that, when it comes to consulting, trading or research in the healthcare and biopharma industry, there is no one better than Jeff.

He added: “When we got the chance to back them, we jumped at it.”

The US financial system has been tested by the failure of SVB and several other banks, which followed the Federal Reserve’s decision to aggressively raise interest rates in 2022 as the central bank tries to tame inflation. But the rapid pace of interest rate rises eroded the value of government bonds, debt that was seen by banks such as SVB as the safest investment in the world.

The losses suffered by banks holding US Treasuries prompted a widespread reconsideration of the risks that interest rate hikes pose to banks’ portfolios of securities.