The Baupost company and SVB Financial Group announced on Sunday that an agreement had been reached to sell the latter’s investment banking division to a company led by some of its own senior bankers, including Jeffrey Leerink.
According to court documents filed in connection with the sale, the buyers would pay $55 million in cash and erase $26 million of SVB Financial Group’s debt. Additionally, the buyers will take on the obligations associated with deferred banker remuneration while allowing SVB Financial Group to retain 5% of the investment bank’s stock.
Regulators to take over deposit operations
Since Silicon Valley Bank failed earlier this year, when its botched capital raise shook the banking sector and forced US regulators to take over its deposit-taking operations, the unit, known as SVB Securities, has been for sale.
The division will again use the moniker Leerink Partners, a name previously used four years ago. In an effort to support it’s expanding investment banking franchise, SVB Financial paid $280 million to acquire the consultancy firm with a focus on the healthcare industry in 2019.
The court presiding over SVB Financial’s bankruptcy procedure must still approve the takeover before it can proceed. The famed sell-side equities research company MoffettNathanson, which SVB Financial acquired in 2021, will not be purchased by the buyout group.
Leerink, who will serve as chair and chief executive of the company, said, “The management team and I are excited to return to our heritage of owning and guiding the premier healthcare investment bank and relaunching the business under the trusted Leerink Partners brand.”
The main holding company of Silicon Valley Bank, SVB Financial Group, filed for bankruptcy in March after being taken over by the FDIC due to a $42 billion run on customer accounts. Both an asset management company and an investment bank are part of SVB Financial Group.
The holding company’s $2 billion in cash on hand, as well as the value of the tax savings from operating losses, will be utilized to repay bondholders and preferred investors. They have $7 billion in claims in total.
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A number of well-known investors in distressed debt have built significant stakes in SVB Financial Group assets. The SVB and the FDIC have been engaged in a heated argument throughout the bankruptcy process regarding the group’s cash deposits at the defunct bank that is now under the regulator’s authority.
Since SVB’s demise and the bankruptcy of its holding company, other businesses have been vying for the institution’s top talent. A lawsuit has been filed by First Citizens Bank in North Carolina, the organization that purchased SVB from the FDIC, over HSBC’s hiring of 40 SVB commercial bankers who are headquartered in the US. HSBC recently acquired SVB’s UK commercial banking unit. 11 software investment bankers from SVB Securities have also been engaged by boutique advisory company Moelis & Co.
Leerink and SVB had “for many years” had the hedge fund as a customer, according to Josh Greenhill, a partner at Baupost. We have firsthand knowledge that Jeff is the best in the healthcare and biopharma field when it comes to advice, trading, or research.