Buyout titans weigh purchases from Silicon Valley Bank loan book

The world’s largest private investment firms are exploring the purchase of loans from the remains of Silicon Valley Bank after the collapse of the tech-focused lender last week.

Blackstone Group, Apollo Global Management, KKR, Ares Management and Carlyle Group are among the buyout groups examining SVB’s $74bn loan book for pieces that might fit into their credit portfolios, according to people familiar with the matter.

California-based SVB was shut down by regulators on Friday after customers pulling deposits caused a bank run. The Federal Deposit Insurance Corporation and its advisers are considering sales of the entire SVB or specific assets or businesses of the failed bank.

The interest of private investment groups comes as they have crowded into lending businesses traditionally dominated by banks. Apollo, with $550bn under management, is actively reviewing the SVB loan book for pieces that might fit in its credit unit.

“The opportunity for us is to continue to be a conduit for investors to take investment-grade type, safe yield opportunities from the banking system to the investment marketplace to maintain diversification of our financial system,” Marc Rowan, Apollo’s chief executive and co-founder, told the Financial Times.

Blackstone’s $246bn-in-assets credit arm is weighing the purchase of some of SVB’s larger loan portfolios that they deem mature and of adequate scale. It may also consider a bid for the entire loan portfolio outright, said one person briefed on the matter, who cautioned that interest was preliminary and no formal bid had been made.

Blackstone’s hedge-fund solutions arm, which manages $80bn in private capital assets on behalf of institutional investors, may consider buying SVB Capital, the bank’s fund of funds unit with $8bn in assets, said the person. Blackstone had no interest in buying the bank as a whole, they added.

KKR, Carlyle and Ares have also begun studying loan asset purchases from SVB, according to three people briefed on the matter.

Apollo is also not seeking to acquire SVB in its entirety, but the FT has reported it may assist a group of top venture capital firms that are considering reviving parts of the bank’s client-facing operations.

Big US banks such as JPMorgan Chase and Citigroup have been inundated with requests from customers seeking to transfer funds from smaller regional banks since SVB’s failure. Rowan said he found it “ironic” that large banks were poised to benefit after the Dodd-Frank reform law, established after the 2008 financial crisis, was designed to mitigate industry concentration.

Apollo was formed in 1990 by former executives of investment bank Drexel Burnham Lambert to acquire the junk bond portfolio of a failed California insurer, Executive Life. Through the financial crisis the firm had almost exclusively focused on leveraged buyouts.

However, it now manages nearly $400bn of credit assets and has aggressively built and acquired dozens of corporate lending businesses. Apollo most recently took over the securitised products origination unit from Credit Suisse.

When asked in February by a stock analyst if Apollo sought to create its own bank, Rowan demurred. “We are not a competitor to the banking system. We actually don’t want what the banking system wants. We don’t want the client. We can’t sell the client equity, advice, M&A, treasury, payments, FX and derivatives,” Rowan responded on the earnings call.

Rather, he said money managers such as Apollo could be a better home for lending activities.

“Everything that was once on a bank balance sheet is now an investment product,” Rowan added.