Before SVB Financial Group bondholders can collect the billions they are owed, the bankrupt company may have to file a claim with the Federal Deposit Insurance Corp. to recover $2 billion worth of deposits trapped by the receivership of Silicon Valley Bank, Bloomberg News reported. That’s because the cash can only be returned to the bank holding company through the receivership process set up after federal regulators seized Silicon Valley Bank, the FDIC argued in court papers on Wednesday. SVB Financial has been sparring with the agency over the $2 billion since filing for bankruptcy in March. The dispute has already bogged down the Chapter 11 case and threatens to pit the bankruptcy process against the receivership process the FDIC uses to repay creditors. “Although the FDIC approved additional funding under the systemic risk exception to protect SVB’s depositors, nothing that has transpired since March 10 altered the debtor-creditor relationship that exists” between the former parent company and the FDIC, lawyers representing the agency wrote in court papers filed on Wednesday.
