Calling All FIG and RX analysts: SVB - A Case Study
We all just saw what happened. a 60% decline in equity will probably break a debt covenant. The company has so many current liabilities on and off the balance sheet that I am quite sure that they will have to restructure.
According to their balance sheet, they have more Assets than liabilities. However, what is not shown on the balance sheet is the capital commitments that they have promised under a year.
They have total unfunded credit commitments of 48bn that expire this year, and an aggregate 62bn in the next few years. Will creditors take these funds? Why or why not in the situation that they might not have access to it soon.
What's additionally worrying is that they are contractually obligated to pay back an approximate 16bn in short term debt.
All in the mean while? The company faces a massive cash crisis, facing a 3bn dollar cash loss in 2021 and a associated 783mm cash loss in Fy'22.
The company has an approximate 173bn in deposits. Do you think a run on the bank is indefinite? Users are already having problems trying to withdraw their capital, which will only make more problems.
What can possibly make the problem worse, you might ask? They have 90Bn dollars in CMO's during a high interest rate environment which causes investment securities such as these to have more defaults.
As per SVB's asset management unit, which manages over 200bn in AUM, their Private Credit fund is heavily exposed to venture debt due to the primarily venture capital nature of their funds. With powel continuing interest rate hikes, and tech in a death spiral, How much exposure do they have on these funds?
This is my interpretation, but this company has been on fire since Tech died in 2021, this is going to be the Fat Man to Lehman Brother's Little Boy. Not to mention Ackerman thinking that the US should consider a bailout.
Why the MS?![]()
It seems highly unlikely to me that they would. They will probably raise however much equity at dilutive valuations it takes, which would cure any covenant breach that might occur.
This isn't quite crypto, where every "liquidity crisis" instantly nukes the duct-taped together Quickbooks shadow bank. Their CDS peaked in November 2022. I'd be willing to bet somebody is in there right now with the management team getting paid a sweet retainer for some liability management advice though.
74% of share value lost in a single day. (22% decline in aftermarket). PJT gotta be fucking crazy rn
Lol my comment aged like milk - definitely didn't do enough work.
Reorg reported last night that they are prepping Ch. 11 for the holdco.
Turns out I was right on all accounts lol
But you were right they hired CVP ASAP and even CVP gave up on a carveout, my guess is that they're going to Chapter 7. No way in hell someone is giving DIP financing, and creditors are going to eat them alive.
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