23-10367-mg Doc 639-1 Filed 10/31/23 Entered 10/31/23 20:30:07
Supplement
Notes and Supporting Documentation Pg 4 of 7
On June 29, 2023, the Bankruptcy Court approved an order authorizing the Debtor to reject certain
executory contracts and unexpired leases (the “Lease Rejection Order”) [D.I 370]. Fourteen leases were included in this order, two of which were rejected effective June 30, 2023, and the remaining twelve leases rejected effective
September 30, 2023.
The associated ROU assets and lease liabilities for the two leases rejected as of June 30, 2023 were written off in the
June MOR.
In September 2023, the Debtor accrued estimates for associated lease rejection claims and wrote off the lease liabilities, ROU assets, all
fixed assets, and any tenant improvement receivables that will not be collectible associated with the remaining twelve leases rejected pursuant to the Lease Rejection Order. The charges recorded for these items, totaling $11.5 million, are
reflected in Reorganization Items, net, in the Supplemental Statement of Operations attached to the MOR. Accounts Receivable, Fixed Assets, Lease ROU Asset and Lease Liabilities reflected in the Supplemental Balance Sheet attached to the MOR were
also reduced in connection with these write-offs.
On September 20, 2023, the Bankruptcy Court entered a stipulation and agreed order (the
“Charlotte Lease Order”) [D.I. 567] related to an office lease (the “Original Charlotte Lease”) between SPUS9 The Line JV, LLC, as landlord, and SVB Financial Group, as tenant. By the Charlotte Lease Order, the Original Charlotte
Lease will be terminated upon the consummation of the Sale of SVB Securities entities, entry of the Charlotte Lease Order and the satisfaction of certain other conditions precedent.
Note 7: Investment in Subsidiaries
The primary
subsidiary business operations of the Debtor during the reporting period are:
SVB Capital
SVB Capital is the venture capital and credit investment arm of the Debtor, which focuses primarily on funds management. SVB Capital manages over
$9.5 billion of funds on behalf of third party limited partner investors and, on a more limited basis, the Debtor. The SVB Capital family of funds is comprised of pooled investment vehicles such as direct venture funds that invest in companies
and funds of funds that invest in other venture capital funds, as well as debt funds that provide lending and other financing solutions. SVB Capital generates income for the Debtor primarily through investment returns (including carried interest)
and management fees.
The Debtor filed a motion with the Bankruptcy Court on August 29, 2023, [D.I. 534] seeking approval to assume and assign
certain executory contracts (the “Management Agreements”) to its non-debtor subsidiary, SVB Capital Management LLC (“SVB Capital ManCo”). The purpose of these assignments was to stand up
SVB Capital as a stand-alone business. On September 20, 2023, the order was entered [D.I. 570]. Effective October 1, 2023, SVB Capital ManCo will be the investment advisor to the SVB Capital funds. The effect of these contract assignments
is the transfer of rights to management fees that total approximately $65 million annually.
In September, the Debtor recorded a liability of
approximately $23 million for unpaid operating expenses incurred by SVB Capital ManCo. The offset to the liability was the intercompany account with SVB Capital ManCo. Costs incurred by SVB Capital ManCo prior to the assignment of the
Management Agreements will be paid by the Debtor. The expenses incurred by SVB Capital ManCo are, and will continue to be, reflected as costs of SVB Capital ManCo.
In October, contemporaneous with the assignment of the Management Agreements, the Debtor will cancel $30 million of intercompany receivables from SVB
Capital ManCo. For accounting purposes, this cancellation will be deemed a capital contribution on the books of SVB Capital ManCo and an investment by the Debtor in SVB Capital ManCo.
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