Hedge Funds Propose to Purchase Start-Up Deposits of Silicon Valley Bank

03/12/2023 07:08 • Digital Disruptors • 87 views

According to reports, the US financial media Semafor quoted people familiar with the matter as reporting that hedge funds are proposing to purchase the start-up deposits of Silicon Valley Bank (SVB) at a price as low as 60% of the face value. After SVB was taken over by the Federal Deposit Insurance Corporation of the United States, Oaktree, a well-known non-performing debt investment company, began to lend a helping hand to startups. According to the report, this bid range reflects the expectation of how many uninsured deposits will eventually be recovered once the bank’s assets are sold or liquidated. According to the previous report of The Information, the traders of the investment bank Jeffrey are also contacting the founders of the start-up companies whose funds are trapped and proposing to purchase their deposit claims at a discount price.

Hedge funds propose to purchase the startup deposits of Silicon Valley Bank at a discount

Introduction

Recent reports suggest that hedge funds have proposed purchasing start-up deposits of Silicon Valley Bank (SVB) at a price as low as 60% of the face value. This bid range reflects the expectation of potential uninsured deposits recovery once the bank’s assets are sold or liquidated. Additionally, Jeffrey, a well-known investment bank, has shown interest in contacting the founders of start-up companies whose funds are trapped in SVB and proposing to purchase their deposit claims at a discount price.

The Background

SVB is a leading financial institution in the United States and had allowed banking services to many start-ups. However, due to the economic downfall caused by COVID-19, many start-up companies suffered and could not repay their loans to the bank, which led to the bank being taken over by the Federal Deposit Insurance Corporation.

Oaktree and Startups

Oaktree, a prominent non-performing debt investment company, has extended its assistance to start-ups affected by the SVB takeover. It is believed that the company is offering help in the form of loans to these companies.

The Proposed Purchase

According to reports, hedge funds have come forward proposing to purchase the start-up deposits of SVB at a price well below the face value. This, in turn, is an indication of the expectation of how much uninsured deposits will be recovered when the bank’s assets are sold or liquidated.

Jeffrey’s Interest in Start-Ups

Jeffrey, one of the well-known investment banks, has reportedly shown keen interest in purchasing deposit claims of start-ups at a discounted price. The traders of the investment bank are reaching out to the founders of the start-ups and proposing to buy their deposit claims at a lower cost.

The Future of SVB

It is still unclear what direction SVB will take after the takeover. The stakeholders are closely monitoring the situation, and many are looking for ways in which to maximize their returns. One potential avenue is the recovery of uninsured deposits through the purchase of these claims at a discounted price from start-up companies.

Conclusion

In conclusion, the current proposals by hedge funds and investment banks indicate a willingness to assist start-ups affected by the SVB takeover. The ability to purchase deposit claims at a discounted price presents opportunities for potential uninsured deposit recovery. The future of SVB remains unclear at this stage, but these proposals could certainly offer assistance to its stakeholders in maximizing returns.

FAQs

1. What is the likelihood of the proposals by hedge funds and investment banks coming to fruition?
2. Can start-up companies reject these proposals to sell their deposit claims?
3. How will the sale of SVB’s assets affect the overall banking industry in the United States?

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