Buyout titans weigh purchases from Silicon Valley Bank’s loan book

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

Blackstone Group, Apollo Global Management, KKR, Ares Management and Carlyle Group are among the buyout groups examining SVB’s $74 billion loan book for parts that could fit into their loan portfolios, according to those familiar with the matter Persons.

California-based SVB was shut down by regulators on Friday after customers withdrawing deposits caused a bank run. The Federal Deposit Insurance Fund and its advisors are considering selling all of SVB or certain assets or businesses of the failed bank.

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

“The opportunity for us is to continue to be a channel for investors to bring safe return opportunities from the banking system to the investment market to maintain the diversification of our financial system,” Marc Rowan, chief executive and co-founder, told the Financial Times.

Blackstone’s $246 billion credit arm is considering buying some of SVB’s larger loan portfolios that it believes are mature and appropriate. A full offer for the entire loan portfolio could also be considered, said a person who was briefed on the matter, warning that rates are preliminary and no formal offer had been made.

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

KKR, Carlyle and Ares have also begun investigating the purchase of loan assets from SVB, according to three people briefed on the matter.

Apollo also doesn’t aim to fully acquire SVB, but the FT has reported that it could potentially back a group of leading venture capital firms considering revitalizing parts of the bank’s client-facing operations.

Big US banks like JPMorgan Chase and Citigroup have been inundated with inquiries from customers wanting to transfer money from smaller regional banks since the collapse of the SVB. Rowan said he found it “ironic” that big banks were poised to take advantage after the Dodd-Frank Reform Act, introduced after the 2008 financial crisis, aimed to ease industry concentration.

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

However, it now manages nearly $400 billion in lending assets and has aggressively built and acquired dozens of corporate lending businesses. Most recently, Apollo took over the origination unit for securitized products from Credit Suisse.

When Apollo was asked by an equity analyst in February about starting his own bank, Rowan disagreed. “We are not in competition with the banking system. We don’t actually want what the banking system wants. We don’t want the customer. We can’t sell the client stocks, advisory, M&A, treasury, payments, forex and derivatives,” Rowan replied to the conference call.

Rather, he said wealth managers like Apollo could be a better home for lending activity.

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