SVB collapse galvanizes tech sector lawyers as Clifford Chance advises HSBC on rescue of UK arm

Host of US and UK law firms called into action following Friday’s collapse of one of Silicon Valley's largest lenders
Jan 31, 2020 Santa Clara / CA / USA - Silicon Valley Bank logo at their headquarters and branch; Silicon Valley Bank, a subsidiary of SVB Financial Group, is a U.S.-based high-tech commercial bank

Shutterstock; Sundry Photography

The collapse of Silicon Valley Bank (SVB) following a run on its deposits has spurred legal teams on both sides of the Atlantic into action advising on the fall out from what the Financial Times called the second-largest bank failure in US history.

The bank, whose deposits were insured by US regulators, was placed into receivership on Friday. That triggered a wave of advice from US lawyers on alternative sources for immediate-term financing, both privately or via sponsors, or via bridging loans to shore up immediate liquidity needs.

Meanwhile, in the UK, teams from Clifford Chance (CC), Slaughter and May, Ashurst, Hogan Lovells and Freshfields Bruckhaus Deringer among others were called in to advise on the fate of SVB’s smaller UK unit, which culminated in its sale to HSBC, advised by CC, today for a nominal sum. 

In the US SVB was reportedly advised by US law firms Holland & Knight and Sullivan & Cromwell. Foster Sayers, general counsel for software company Pramata, told Corporate Counsel magazine the collapse was "an apocalyptic moment", with his company withdrawing its deposits with SVB and transferring them elsewhere on Thursday, “not a moment too soon".

Subsequently, the US government announced lending facilities over the weekend that guaranteed all US deposits, insured and uninsured, with the bank, narrowing the risk of greater financial contagion. 

Richard Goold, a partner at Wilson Sonsini, wrote on LinkedIn: “Good news from Washington, and let's hope that this is sufficient to contain the US situation.”

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Global law firms including White & Case, Orrick and Goodwin Proctor swiftly mobilised client briefings on Monday to address US and UK regulatory issues, managing client expectations across investor, operator and regulatory communities. 

The firms brought together banking, technology, insolvency and regulatory teams to answer client calls, focusing on options for alternative funding sources, cash flow and other financial restructuring and insolvency issues.

Ariel White-Tsimikalis, an ECM partner at Goodwin Proctor, spoke for many on LinkedIn, noting that “it's certainly been no ordinary weekend for the UK and US tech ecosystem”. 

Zickie Lim, a venture capital partner at Mills & Reeve, said: “The ramifications across the tech sector and amongst investment funds and their portfolio companies are likely to be fairly seismic.”

A briefing from Taylor Wessing said initial advice would focus on the availability of credit lines, day-to-day decisions involving cash management and potentially significant cash deposits held with SVB or its UK arm. 

As well as advising on impacts on their portfolio companies, institutional investors were also concerned about their cash deposits and managing risk. The firm said: "We are alive to the multitude of contractual terms that many of our clients are currently navigating and seeking to balance with the wider commercial risks they may face as this situation develops."

UK regulators intervened swiftly, facilitating HSBC’s acquisition of the UK arm of SVB. According to the FT, the deal saw HSBC acquire approximately 3,300 clients, a loan book of around £5.5bn and deposits of around £6.7bn, with SVB UK's tangible equity expected to be around US$1.4bn.

HSBC chief executive Noel Quinn said the acquisition made “excellent strategic sense for our business in the UK".

The transaction was implemented according to a mandatory reduction and share transfer instrument issued by the Bank of England under the post-financial crisis Banking Act 2009. 

The CC team advising HSBC was led by CC's Richard Crosby, Caroline Dawson and Alanna Hunter as corporate and regulatory partners. They were supported by a multi-disciplinary team of counsel and associates from corporate, technology, regulatory, restructuring and insolvency, employment, pensions and incentives. 

Hogan Lovells was instructed by HM Treasury, led by Rachel Kent, Sharon Lewis, Andrew Taylor and a team of counsel and associates, alongside in-house legal advisers. 

Both Ashurst and Freshfields are understood to have advised the Bank of England with Slaughter and May advising SVB UK.

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