SVB estate spins-off former Leerink Partners as… Leerink Partners

New York bankruptcy court approves sale of the SVB Securities business for $81m in cash and subordinated debt to Klarman-backed management group.

The New York bankruptcy court has ordered the sale of SVB Securities and related assets of the SVB Financial Group estate for over $81 million, according to court documents and New Generation Research, a Boston-based provider of data and intelligence on corporate bankruptcies. This signifies a remarkable coup by Jeff Leerink, who has secured the backing of Seth Klarman and the Baupost Group.

The sale is the first such monetisation of one of the companies in the Silicon Valley Bank group since the bank collapsed in March. At the time of the collapse, the bank itself was taken over by regulators, but the parent company SVB Financial filed for chapter 11 protection in order to allow for the sale of assets. It follows an agreement between the buyers and sellers, reached in mid-June. In a statement, SVB Financial Group’s chief restructuring officer, Bill Kosturos, expressed confidence in the “disciplined and independent process”  that had led to the agreement, and in the ability of the management buyers to “preserve and enhance the value of the business”.

The sale does not involve SVB Capital, the fund of funds operation that reportedly had $9.5 billion in AUM before the bank failure.

The bankruptcy court’s order approving the sale outlines the multiple steps that will be necessary to complete the complicated transaction. For example, the debtor must cause its non-debtor subsidiary, SVB Securities Holdings, to sell all its issued and outstanding membership interests in two non-debtor companies, SVB Securities (the broker-dealer) and SVB MEDACorp.

On its website, SVB MEDACorp describes itself as the “expert network arm” of SVB Securities, “focused on giving [investors] to healthcare professionals” and key opinion leaders.

The buyer of all the assets cited in this order is a special purpose vehicle known as the Saffron Group. Saffron is owned by certain management investors with the support of The Baupost Group.

The management team is led by Jeff Leerink, the CEO and founder of SVB Securities.

Four years ago, SVB Financial bought what was then Leerink Partners for $280 million, because in doing so it acquired a range of investment banking services adapted for healthcare and life sciences programmes, as American Banker reported at the time of the acquisition. The parent then rebranded the acquired party as SVB Securities. Now that it is being sold, that entity is to be re-rebranded as Leerink Partners.

Baupost invested $100 million in Saffron. This seems to have led to erroneous press reports that the price of the SVB Securities business itself was $100 million. The members of the management group invested another $50 million collectively.

The consideration for the purchase will consist of cash of $55 million and a subordinated debt payment amount of $26 million. This, along with certain incidental considerations that are difficult to value, yields a consideration of $81 million-plus. The remaining money available to Saffron will be available as working capital for the new incarnation of Leerink Partners.