In an attempt to shore up its financial position, Silicon Valley Bank sold most of its marketable assets, resulting in a loss that panicked markets. Goldman Sachs was the buyer.
Last week, Silicon Valley Bank (SVB) «substantially» sold its available-for-sale (AFS) securities in an attempt to strengthen its financial position, and increase profitability and financial flexibility. SVB said the transaction would result in an after-tax loss of $1.8 billion, according to an 8K filing by SVB with the Securities and Exchange Commission (SEC).
The sale to an unknown buyer at the time was made to reinvest the proceeds as part of a plan to raise $2.25 billion of common equity and mandatory convertible shares, SVB said in a mid-quarter update to its strategic actions published on March 8.
On March 1o, SVB was closed by California authorities and the Federal Deposit Insurance Corporation (FDIC) was appointed as receiver.
Enter Goldman Sachs
In another filing with the SEC yesterday, SVB revealed the buyer of the securities was Goldman Sachs who purchased the portfolio at «negotiated prices,» according to the filing.
The securities had an approximate book value of $23.9 billion for which Goldman paid $21.45 billion, which resulted in the $1.8 billion after-tax loss ultimately leading to the collapse of SVB. An earlier filing showed Goldman Sachs was also the bank engaged by SVB to help with the $2.25 billion unsuccessful capital raise.
According to a «Yahoo Finance» report Wednesday citing a person familiar with the matter, Goldman bought the «highly liquid» securities at arm's length and on market terms» from SVB.
In its mid-quarter update, SVB said «we are experienced at navigating market cycles and are well positioned to serve our clients through market volatility, with a high-quality, liquid balance sheet and strong capital ratios.»
