Startups scrambling to refinance SVB debt

Startup companies that got temporary bridge funding from Silicon Valley Bank are now scrambling to figure out how they’ll refinance those obligations when they come due, according to an official at a Canadian government-owned venture capital firm.

The debt was meant to help finance companies until they get fresh capital from equity sales, according to Jerome Nycz, executive vice-president at Canada’s BDC Capital in a telephone interview Monday.

But now it’s hard for companies to sell equity, with initial public offering volume having plunged.

And questions about how this debt will be resolved could make it even harder to raise capital in the future, Nycz said. It’s unclear who will be buying SVB or its assets, and what their plan will be for the debt, he said.

“Are they going to be just asking borrowers to repay the notes or will they be extending terms?”

The companies in BDC’s portfolio with this debt have at least four months before it’s due, according to Nycz, so there is some time to figure out new financing. The debt sometimes had initial maturities of between two and three years, and were sometimes convertible into equity. The debt is generally senior in the company’s capital structure.

The fate of this debt is one of a series of questions still unresolved after Silicon Valley Bank collapsed on Friday. The FDIC held an auction for the bank over the weekend, but no buyer emerged. Instead, the regulator created a bridge bank to house SVB’s deposits and has promised to make all its customers whole.

Questions about how the debt will be resolved could make it even harder to raise capital in the future, said BDC Capital’s Jerome Nycz