The U.S. government announced Sunday night that all depositors at Silicon Valley Bank (SVB) would have access to all their money on Monday morning. This announcement cleared much of the uncertainty surrounding the placement of SVB, a common provider of financing and banking services for many Israeli startups, in receivership last Friday. EBN is trying to address some of the common questions concerning these quickly developing events:
Q: Why is SVB important to the Israeli Hi-tech sector?
A: SVB has been an important player in the Israeli high-tech ecosystem for many years, providing banking services, venture lending and financing to startups, venture capital funds and established tech companies. Since 2005, SVB operated a local representative office in Tel Aviv.
Q: What happens now?
A: On Friday, SVB was placed in receivership, which means that the banking regulators have taken over operations to protect depositors. All deposits were frozen. The U.S government insures deposits up to US$ 250,000, and in order to protect the insured deposits, the Federal Deposit Insurance Corporation (FDIC) has created the Deposit Insurance National Bank of Santa Clara (DINB), as a vehicle to allow insured depositors to obtain access to their insured deposits, and operate certain limited banking activities and services. On Sunday evening, the U.S. government approved an extraordinary intervention which would allow all depositors at SVB access to all their money on Monday morning.
Q: We still have no access to our bank accounts at SVB. What can we do?
A: Make sure to contact SVB, FDIC and DINB, and follow their instructions and publications. Arrange your records as to your accounts and your deposits with SVB, so you can get a ‘receivership certificate’.
Q: We are paying salaries through our SVB account. What should we do now?
A: Unless you are able to continue doing so through DINB, we suggest you arrange an alternative, and communicate to your employees that there may be a delay with payment of the coming salaries.
Q: We are receiving payments from our customers to our SVB account. What should we do now?
A: To ensure that you receive such payments, you should quickly reach out to your customers and other payors and instruct them to remit payments to a different collection account at a different bank.
Q: If we received venture debt from SVB, is the debt still owed to SVB?
A: Subject to specific terms of such loan, the general answer is yes, you still owe the outstanding venture debt to SVB (or an acquiror of such debt), but you may be unable to draw further funds at this time. Credit agreements typically do not permit the borrower to set-off from payments to the bank, but we recommend considering this issue on a case-by-case basis. If there are other payments you are required to make, we suggest you receive specific advice before making such payment to make sure these are made to the correct account. The regulators are expected to issue further guidance soon.
Q: We issued SVB warrants. Are they still outstanding?
A: Subject to specific terms of such warrants, the general answer is yes, these warrants are still outstanding and the receiver will likely have all rights in such warrants. The regulators are expected to issue further guidance soon.
YOU SHOULD NOT TREAT THE ABOVE GENERAL DISCUSSION AS AN OPINION OF COUNSEL. IT IS IMPERATIVE TO ASSESS ANY SPECIFIC SITUATION ON ITS OWN FACTS WITH THE RIGHT MEMBERS OF THE EBN TEAM.
Erdinast, Ben Nathan, Toledano & Co. With Hamburger Evron
March 13, 2023
