HSBC emerges as last-ditch white knight for Silicon Valley Bank UK
HSBC Holdings has emerged as a potential ‘white knight’ bidder for Silicon Valley Bank (SVB) UK as the government and regulators seek to avert the lender’s insolvency.
Sky News has learnt that HSBC was on Sunday night exploring a bid for the British arm of the stricken technology-focused lender, joining a slew of smaller rivals in the emergency sale process triggered by the collapse into government ownership of its American parent.
One insider said a deal remained uncertain and that a decision by the Bank of England to place SVB UK into insolvency proceedings could still take place in the coming hours.
JP Morgan, the American banking behemoth, has also been asked to examine a bid.
HSBC is thought to be the likelier of the two global lenders to pursue a transaction, although it declined to comment and it remained possible that it would walk away from the process.
The expedited nature of the sale raised doubts among some observers that HSBC would be able to move sufficiently quickly to acquire SVB UK before the business is placed into insolvency.
More stories:
Bank of London submits rescue bid for UK arm of Silicon Valley Bank
Ex-Tory donor’s bank Oaknorth in talks to buy stricken Silicon Valley Bank UK
High street banks given 24 hours to rescue Silicon Valley Bank UK
Any deal would not be material to HSBC in the context of its global balance sheet, but would sharpen its exposure in its home market of the UK to corporate clients in the tech and biotech sectors.
HSBC and JP Morgan were among the large international banks, also including Barclays and Lloyds Banking Group, which were asked to consider participating in the pre-insolvency sale process.
Lloyds was also said to be deliberating on Sunday night about whether to submit an offer.
Please use Chrome browser for a more accessible video player
A business lender founded by a prominent former Conservative Party donor is in talks to buy the British operations of Silicon Valley Bank, the US lender which collapsed last week.
Earlier on Sunday, both Oaknorth Bank, a business lender founded by a prominent former Conservative Party donor, and The Bank of London, a new clearing bank, submitted formal bids to buy SVB UK.
Interest from ADQ, an Abu Dhabi state-backed investment vehicle, is thought to have cooled.
The government and banking regulators are racing to find a solution to the crisis before markets open on Monday morning, with Rothschild, the investment bank, asked to handle the quickfire process by SVB UK with the consent of the Bank of England.
The Treasury said in a statement on Sunday that the government was working on funding solutions to help hundreds of SVB UK clients meet cashflow obligations.
“The UK has a world-leading tech sector, with a dynamic start-up and scale-up ecosystem,” it said.
“The government recognises that, given the importance of Silicon Valley Bank to its customers, its failure could have a significant impact on the liquidity of the tech ecosystem.
“The government is treating this issue as a high priority, with discussions between the Governor of the Bank of England, the Prime Minister and the Chancellor taking place over the weekend.
JP Morgan, the American banking behemoth, has also been asked to examine a bid
“The government is working at pace on a solution to avoid or minimise damage to some of our most promising companies in the UK and we will bring forward immediate plans to ensure the short term operational and cashflow needs of Silicon Valley Bank UK customers are able to be met.”
The implosion of SVB’s US-listed parent company, which has been taken into government control, represents one of the biggest global banking collapses since the financial crisis of 2008.
UK depositors stand to receive up to £85,000 as part of the resolution of the British arm of SVB, sparking fears about the fate of substantial amounts of funding in the start-up community.
“We are working at pace on a solution we will bring forward very soon plans to make sure people are able to meet their cashflow requirements, pay their staff,” Jeremy Hunt, the chancellor, told Sophy Ridge on Sunday.
“But obviously what we want to do is to find a longer-term solution that minimises or even avoids completely losses to some of our most promising companies.”
On Saturday, dozens of early-stage companies wrote to Mr Hunt to warn of “an existential threat to the UK tech sector”.
In a letter seen by Sky News, founders including those from Adzuna, Curve and Thriva called on Mr Hunt to intervene.
“The majority of the most exciting and dynamic tech businesses bank with SVB and have no or limited diversity in where their deposits are held,” the draft letter said.
Please use Chrome browser for a more accessible video player
Britain’s biggest banks have been given 24 hours to rescue Silicon Valley Bank UK from collapse as the Bank of England prepares to place it into an insolvency process.
“This weekend the majority of us as tech founders are running numbers to see if we are potentially technically insolvent.
“The impact of this is far greater than our individual businesses.
“The Bank of England’s assessment that SVB going into administration would have limited impact on the UK economy displays a dangerous lack of understanding of the sector and the role it plays in the wider economy, both today and in the future.”
The founders warned Mr Hunt, who will deliver his Budget statement on Wednesday, that the collapse of SVB UK would “cripple the sector and set the ecosystem back 20 years”.
“Many businesses will be sent into involuntary liquidation overnight,” they wrote.
“Many other businesses, both in the tech sector and the wider economy – the customers and suppliers of these businesses – will be negatively impacted by these businesses going bankrupt.”
Interpath Advisory has been lined up to handle the insolvency process in the UK if a buyer cannot be found.
Business
Vivergo: How US-UK trade deal could bring about collapse of huge renewable energy plant in Hull
The smell of yeast still hangs in the air at the Vivergo plant in Hull but the machines have fallen quiet.
More than 100 lorries usually pass through here each day, carrying 3,000 tonnes of wheat. It is milled, fermented and distilled. The final product is bioethanol, a renewable fuel that is then blended into E10 petrol.
This is a vast operation. It took several years to build, with considerable investment, but it is on the verge of closing down. Management and staff are holding out for a last-minute reprieve from the government but time is running out.
It’s been a turbulent journey. The plant was already being annihilated by US rivals, losing about £3m a month. Vivergo and Ensus, based in Teesside, blamed regulations that enable US companies to earn double subsidies.
They were pushing for regulatory change but then a killer blow: The US-UK trade deal, which allows 1.4 billion litres of American ethanol into the UK tariff-free (down from 19%).
“We’ve effectively given the whole of the UK market to the US producers,” said Ben Hackett, managing director at Vivergo.
“If we were to have the same support that the US industry has, if we could use genetically modified crops, we wouldn’t need that tariff. We would be able to compete. If we had the same energy costs. We wouldn’t need those tariffs.”
The government has the weekend to come up with a plan that could keep the business running. If it fails, Vivergo will begin issuing redundancy notices to its 160 staff.
Ben Hackett
It’s a devastating prospect for workers, many of them live in Hull and are nervous about alternative opportunities in the area.
Mike Walsh, a logistics manager who has been working at the plant for 14 years, said: “It’s not a great place to be at the moment. It’s a very well paid, very high-skilled role and they’ve (Vivergo) given everybody an opportunity in an area that doesn’t pay that well…. The jobs market isn’t as good as what people would like. So it does impact the local economy.”
He called on the government to “help us, save us, give this industry a future”.
His colleague Claire Wood, lead productions engineer, said: “I moved here after a career in oil and gas for 10 years, partly because I want to be part of the transition to renewable fuels. I can see so much potential here and it’s absolutely devastating to know that this place might be closed very, very shortly and that all that potential just goes away.”
Thousands more could be affected. Haulage companies may have to lay off truck drivers and farmers could also suffer a blow.
Vivergo makes bioethanol using wheat. That wheat is bought from farms from Yorkshire and Lincolnshire.
Claire Wood
The National Farmers Union has sounded the alarm, saying: “Biofuels are extremely important for the crops sector, and their domestic demand of up to two million tonnes can be very important to balance supply and demand and to produce up to one million tonnes of animal feed as a by-product.”
Another bioproduct is carbon dioxide. The gas can be captured and used to put the fizz in drinks or injected into packaging to preserve food.
If Vivergo and Ensus were to go, Britain would lose as much as 80% of its output of carbon dioxide. Supplies are already tight across Europe, meaning this decision could compound shortages across a range of sectors, from meat-packing to healthcare.
The industry is calling on the government to help. Vivergo says it needs temporary financial support but that the government must create a regulatory and commercial environment in which it can thrive.
It says rules that award double subsidies to companies that use waste product in their bioethanol must be changed. At present, these rules are being used by US companies that make ethanol from Uldr – a by-product of processing corn. They argue this is not a genuine waste product.
Read more money news:
Something for everyone in latest economic data
Claire’s falls into administration
Lola’s Cupcakes bakes £30m takeover by Finsbury Food
Another option is to grow the market. Industry leaders are calling on ministers to increase the mandated renewable fuel content in petrol from 10% to 15% and for an expansion into aviation fuels. That would allow British companies to carve out a space.
The government has been locked in talks with the company since June.
It said: “We will continue to take proactive steps to address the long-standing challenges it faces and remain committed to a way forward that protects supply chains, jobs and livelihoods.”
However, the time for talking is almost over.
Mr Hackett said he had no idea how the government would respond but he was firm with his stance, saying: “In times of global uncertainty, losing that energy certainty and supply from the UK is a problem.
“I think what they’re missing out on is the future growth agenda. We’re the foundation on which the green industrial strategy can be built. We make bioethanol that today decarbonises transport. Tomorrow it will decarbonise marine. It will decarbonise aviation.”
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Sports2 years agoButton battles heat exhaustion in NASCAR debut
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike