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Weathering the Storm
It started with rumblings: Silicon Valley Bank was in trouble. With over $200 billion in assets, it was no small player.
Over the following week, no one knew which way the wind would blow for Silicon Valley Bank or any other financial institution amidst swirling rumors of distress at other regional banks. Knowing they had to be prepared no matter what, nearly a dozen of our banking clients called Loeb & Loeb. We got right to work.
At first, there were more questions than answers. Silicon Valley Bank was the lead lender in, and administered, credit facilities in which our clients were also lenders. If Silicon Valley Bank failed, could it be replaced as lead lender? Did Loeb & Loeb’s clients need to continue to pay their share of the requested loans to Silicon Valley Bank? If Silicon Valley Bank received interest, or money from the borrowers under the loans, would it be able to make required payments to the lenders?
In deals where Loeb & Loeb’s clients were the lead lender and administrative agent, what would happen if Silicon Valley Bank were to default on its obligations to fund a syndicated loan? Could it be removed as a lender? Could Loeb & Loeb’s clients enforce defaulting lender provisions in existing credit agreements?
At first, there were more questions than answers. Silicon Valley Bank was the lead lender in, and administered, credit facilities in which our clients were also lenders. If Silicon Valley Bank failed, could it be replaced as lead lender? Did Loeb & Loeb’s clients need to continue to pay their share of the requested loans to Silicon Valley Bank? If Silicon Valley Bank received interest, or money from the borrowers under the loans, would it be able to make required payments to the lenders?
In deals where Loeb & Loeb’s clients were the lead lender and administrative agent, what would happen if Silicon Valley Bank were to default on its obligations to fund a syndicated loan? Could it be removed as a lender? Could Loeb & Loeb’s clients enforce defaulting lender provisions in existing credit agreements?
We spent countless hours poring over these and many other questions, helping our banking clients review dozens of loan agreements to get their arms around the risk, where they had exposure, and what the law and existing agreements would allow them to do in different scenarios. Adding complexity, the regulatory foundation underneath us was shifting rapidly. The Federal Reserve and the FDIC issued new guidance faster than the market had seen in a while, changing laws and clarifying what they would and would not backstop.
We dug in, educating our clients on new guidance, balancing historical precedent with real-time changes. It was a very busy week.
By the end of it, the dominoes started to fall. By Friday, there was a run on Silicon Valley Bank and the FDIC put the bank into receivership. Our work wasn’t done.
Receivership offered some clarity. Now we could focus on the practical impacts of doing business with a bank run by the FDIC and assess these dramatic market changes to figure out what to do to strengthen credit facilities going forward and minimize risk from any future market disruptions.
As the storm began to pass, Loeb & Loeb’s clients also saw opportunity. Silicon Valley Bank was once the go-to for startups and venture capitalists. Now those clients were taking their money elsewhere. We started to work with our clients on how to correctly structure transactions in new markets and for new clients that, before the preceding week, were not services that they had historically provided.
Silicon Valley Bank’s collapse shook the banking industry. It caused unprecedented panic and uncertainty. But through it all, Loeb & Loeb’s clients knew that they could trust us to help them weather the storm.
We dug in, educating our clients on new guidance, balancing historical precedent with real-time changes. It was a very busy week.
By the end of it, the dominoes started to fall. By Friday, there was a run on Silicon Valley Bank and the FDIC put the bank into receivership. Our work wasn’t done.
Receivership offered some clarity. Now we could focus on the practical impacts of doing business with a bank run by the FDIC and assess these dramatic market changes to figure out what to do to strengthen credit facilities going forward and minimize risk from any future market disruptions.
As the storm began to pass, Loeb & Loeb’s clients also saw opportunity. Silicon Valley Bank was once the go-to for startups and venture capitalists. Now those clients were taking their money elsewhere. We started to work with our clients on how to correctly structure transactions in new markets and for new clients that, before the preceding week, were not services that they had historically provided.
Silicon Valley Bank’s collapse shook the banking industry. It caused unprecedented panic and uncertainty. But through it all, Loeb & Loeb’s clients knew that they could trust us to help them weather the storm.