(Bloomberg) -- The former owner of Silicon Valley Bank, seized earlier this month by regulators, will need to wait, possibly for several months, to know if it can get back about $2 billion in cash it would need to repay bondholders and other creditors. 

SVB Financial Group won provisional court approval Tuesday to spend only a fraction of the cash the company claims federal regulators must return. What happens with the rest of the money will need to be decided in the coming months, with lawyers for bondholders owed more than $3.3 billion saying they are concerned that the Federal Deposit Insurance Corp. will try to keep the cash.

The FDIC’s decision to lock down the $2 billion “creates jeopardy” in the bankruptcy case, said Tom Lauria, a lawyer representing a large bondholder, Appaloosa LP.

“It seems to be a more urgent issue than a latent one in the context of this case,” Lauria told US Bankruptcy Judge Martin Glenn during a hearing in federal court in Manhattan.

Under FDIC receivership rules it can take months for the agency to decide whether the money will be returned and then years if that decision is appealed, lawyers said during the hearing. The claims process could be resolved “sometime in the next century,” Glenn joked.

Closely Entangled

A major issue for lawyers representing the parties involved — which include the FDIC, Silicon Valley Bridge Bank NA and SVB Financial — is that their operations are closely linked.

“There are a lot of interconnections between the bank and the debtors,” said Sandeep Qusba, a lawyer representing the bridge bank, which was established as a result of the FDIC seizure. SVB Financial sponsors the bank’s employee benefits, for instance. The two also share some of the same vendors. 

But the bridge bank is under the federal government’s purview. The dispute over the $2 billion pits the mission of the FDIC — returning money to depositors — against the priorities of bankruptcy, which is to repay creditors like the bondholders, who hold big claims against SVB.

The FDIC may argue it’s a creditor in the bankruptcy case and file a claim that competes with the bondholders. Lauria argued that any fight over the $2 billion should happen in bankruptcy court.

“The FDIC seems to believe they can resolve their claims away from this court,” he said.

SVB has worked out a number of minor disputes about sharing information and allowing its former employees, who now work for the FDIC-controlled bridge bank, to cooperate with the bankrupt holding company, SVB lawyer James Bromley said in court.

But the main question is what happens to the $2 billion, he said.

The bankruptcy case is SVB Financial Group, 23-10367, US Bankruptcy Court for the Southern District of New York. 

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