BlackRock to Sell $114 Billion of Failed Banks’ Securities

(Bloomberg) — BlackRock Inc. was hired to help the US government arrange the sale of $114 billion in securities held by failed lenders Signature Bank and Silicon Valley Bank.

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The asset-management giant will conduct the sales of $27 billion in securities from Signature and $87 billion from SVB Financial Group’s Silicon Valley Bank, the Federal Deposit Insurance Corp. said in a statement Wednesday. The holdings are mostly agency mortgage-backed securities, collateralized mortgage obligations and commercial MBS, the FDIC said.

The sales “will be gradual and orderly, and will aim to minimize the potential for any adverse impact on market functioning by taking into account daily liquidity and trading conditions,” the agency said.

A BlackRock spokesperson declined to comment.

The Larry Fink-led firm has a history of managing distressed debt for US authorities. In the aftermath of the 2008 financial crisis, the Federal Reserve and the Treasury Department awarded contracts to BlackRock to manage $130 billion of bad debt formerly on the books of investment bank Bear Stearns Cos. and American International Group Inc.

Read more: BlackRock Is Go-To Firm to Divine Wall Street Assets

BlackRock was also one of four co-managers of a Fed program to buy more than a trillion dollars of residential mortgage-backed securities at the time.

Signature and SVB Financial Group’s Silicon Valley Bank were among three major US banks that collapsed in rapid succession last month under the weight of deposit withdrawals. The FDIC was appointed receiver for both banks last month.

First Citizens BancShares Inc. agreed to buy Silicon Valley Bank, which unraveled in less than 48 hours in the biggest US bank failure in more than a decade. Signature’s failure quickly followed, and its deposits and some of its loans were later purchased from the FDIC by New York Community Bancorp’s Flagstar Bank.

While the deals included deposits and bank branches, the buyers were less willing to take on securities purchased by Signature and Silicon Valley Bank when borrowing costs were low, and that have dropped in value amid interest-rate hikes by the Fed. That left the billions of dollars of devalued securities and mortgage obligations in the FDIC’s hands.

–With assistance from Silla Brush, Sam Nagarajan and Shelley Robinson.

(Updates with details of securities in last paragraph.)