SVB was in a jam and called on Goldman. Here's what happened next.

Flawed communication over the offering appeared to feed worries over SVB.Lost in the news around the collapse of Silicon Valley Bank is the role played by arguably the most powerful investment bank on the planet. to help it navigate a difficult situation.

A large downgrade could damage SVB, which has served customers in the venture capital and startup ecosystem since 1983. Unlike industrial or retail companies that might be able to weather rating downgrades, banks are vulnerable to such news because it can undercut trust in their financial underpinnings.

Ideally, companies and their investment banks like to arrange distressed transactions in private meetings with investors, where they agree not to act on sensitive information. That way, the bankers can protect their clients, line up investors, and then announce a completed deal to the market. In industry parlance, investors get"brought over the wall." But it would likely require a longer timeline than what the company or its banker had, one of the people said.

It's a common playbook in the public securities markets. When a company sells shares, hedge funds will short the stock in the open market and then put in an order to buy the shares in the offering, effectively covering their short. By Wednesday, Goldman had put together a deal to have SVB raise $2.25 billion of common and preferred equity, including a $500 million anchor investment from private-equity firm General Atlantic. SVB was ready to launch its offering.

One of the people Insider spoke to said it was an odd place for such an admission without the necessary context. Around that time, Moody's released its rating downgrade, settling on a single notch thanks to the promise of the needed capital raise, but cautioning about SVB's continued weakened position.

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