July 20, 2023

Debt Download

Welcome to Debt Download, Goodwin's monthly newsletter covering what you need to know in the leveraged finance market. Are the debt capital markets this summer as hot as the weather? Read on to find out!

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In the News

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Goodwin Insights

The collapse of industry-leading bank Silicon Valley Bank (SVB) and difficulties at other venture lenders in early 2023 led to fewer loan transactions for emerging companies in the first half of the year. As we enter the second half of 2023, the volume of new loan originations does not appear to be returning to previous levels; nevertheless, the venture debt space remains active and continues to evolve.

In the aftermath of the SVB collapse, VC investors and their portfolio company borrowers have become more successful in negotiating carveouts to the standard requirement of bank lenders that borrowers maintain all of their deposits with the lending institution. Although spreading cash over two or more banks is beneficial for borrowers from a risk management perspective, it makes the overall financial relationship less lucrative for the lenders. As such, even though sourcing venture debt term sheets remains a viable option for many tech, life sciences and other emerging companies, prospective borrowers should expect to encounter tougher standards in the underwriting process than those from 2022 and an increase in pricing, including greater warrant coverage.

Meanwhile, a number of new venture debt lenders are entering, or are planning to enter, the market in an effort to take advantage of the uncertainty left in SVB’s wake. For example, Blackrock announced plans to purchase venture debt provider Kreos; Ares purchased a $3.5 billion loan portfolio from ailing PacWest; Hercules Capital launched Hercules Adviser, a private credit lender seeking to focus on venture and growth companies; and HSBC’s U.S. unit hired over 40 former SVB bankers and signaled a desire to become a leading venture debt lender. It remains to be seen whether these entrants will provide competitive terms or otherwise will be successful at filling SVB’s enormous shoes, but their eagerness for new business may at least translate to opportunities for emerging companies – who often find it challenging to engage the attention of established lenders – to obtain credit in the face of unprecedented challenges.

In Case You Missed It – Check out this recent Goodwin publication: Bank Regulators Issue Guidance for Third-Party Risk Management.


For inquiries regarding Goodwin’s Debt Download or our Debt Finance practice, please contact Dylan S. Brown, Nikolaus J. Caro, and Robert J. Stein.

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