SVB Fallout: Near-Term Impact on Corporate Issuers in Diversified Industries Limited Only to Start-Ups and Specific Subsectors

The fall from grace of leading innovation economy lender Silicon Valley Bank (SVB or the Bank) has raised questions regarding potential systemic risks, triggered a decline in bank stocks, and led to dramatic outflows of uninsured depositors.

SVB's failure has not posed an immediate threat to corporate issuers in our rated Diversified Industries portfolio, and this was true even before U.S. regulators announced that depositors would be made whole, the Federal Reserve announced its willingness to use its "full range of tools" as necessary, and governments around the globe took measures to limit the impacts. This view is based on our assessment that corporate issuers in our rated Diversified Industries portfolio do not have material deposits with or lines of credit from SVB.

Beyond our rated universe but within the broader global Diversified Industries space, early-stage life sciences/healthcare and technology companies are the most directly affected by SVB's failure given the Bank's leading market shares in these subsectors. SVB was not experiencing notable credit problems in its lending portfolio, and this was not the cause of its failure. However, these early-stage firms are likely to find it more difficult to access debt capital at a time when venture capital is slowing down.