Purchases from Silicon Valley Bank book are weighed by buyout giants

After the collapse of Silicon Valley Bank last week, the world’s biggest private investment companies are looking into purchasing loans from the remaining Silicon Valley Bank.

People familiar with the matter said that Blackstone Group, Apollo Global Management (KKR), Ares Management, Carlyle Group and KKR are some of the groups looking at SVB’s $74bn loan portfolio to see if they might be able to incorporate it into their credit portfolios.

California-based SVB was closed Friday by regulators after customers pulled deposits that caused a bank panic. Federal Deposit Insurance Corporation (FDIC) and its advisors are looking at selling the entire SVB, or certain assets or businesses of this bank.

Private investment groups are gaining more interest in lending businesses that were once dominated by banks. Apollo has $550bn under management and is currently reviewing the SVB loan books to see if there are any pieces that could be used in its credit unit.

Marc Rowan, Apollo’s chief executive officer and co-founder, stated, “The opportunity for me is to continue being a conduit for investors, to take investment-grade, safe yield opportunities out of the banking system to market to maintain diversification in our financial system.”

Blackstone’s $246bn in-assets credit arm may consider purchasing some of SVB’s larger loan portfolios it deems to be mature and adequate. One person briefed said that it may also consider making an offer for the entire portfolio. However, the source cautioned that the interest was preliminary and that no formal offer has been made.

The person stated that Blackstone’s hedge fund solutions arm, which manages $80bn of private capital assets for institutional investors, might also be interested in buying some assets. They said that Blackstone did not have any interest in purchasing the entire lender.

KKR and Carlyle have begun to study loan asset purchases from SVB. Three people briefed on this matter said that Ares, Carlyle, and KKR are also studying the matter.

Apollo is not looking to acquire SVB in all its glory, but it has reported it may be able to assist a group top venture capital firms who are interested in restoring some of the bank’s client-facing operations.

Since SVB’s collapse, large US banks like JPMorgan Chase or Citigroup have been overwhelmed with requests from customers to transfer funds to smaller regional banks. Rowan stated that he finds it ironic that large banks are poised to reap the benefits of the Dodd-Frank reform law. This was established following the 2008 financial crisis.

Apollo was founded in 1990 by ex-executives of Drexel Burnham Lambert, an investment bank to acquire the junk bonds portfolio of Executive Life, a failing California insurer. The firm was almost entirely focused on leveraged buyouts during the financial crisis.

It now has nearly $400bn in credit assets, and has aggressively acquired and built dozens of corporate loan businesses. Apollo recently acquired Credit Suisse’s securitised product origination unit.

Rowan retorted to a stock analyst when he asked if Apollo wanted to start its own bank. We are not a threat to the banking system. We don’t really want the bank system’s wishes. We don’t want to be clients. Rowan stated that we cannot sell the client’s equity, advice and M&A.

He said that money managers like Apollo might be a better place for lending activities.

Rowan said, “Everything that was once on the bank balance sheet is now an investor product.”

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