Connaughton said private equity firms like Bain have been turning to peers with direct lending arms to secure debt for deals because traditional bank financing has become scarcer as banks adjust to the quick rise in interest rates. This is despite debt from direct lenders being significantly more expensive than bank financing.
While the banking sector is strong enough to withstand SVB's failure, the lender's collapse will add to the caution that banks have been showing, Connaughton said in a Reuters Newsmaker interview. "The questions that are getting raised about Silicon Valley Bank are, 'Where is the liability and asset matching ... Where does that all sit and what liquidity concerns are out there?'" Connaughton said.
The logo of Bain Capital is displayed on the screen during a news conference in Tokyo, Japan October 5, 2017. REUTERS/Kim Kyung-Hoon Connaughton said the cost of typical debt financing for private equity firms doing deals had jumped from between 5% and 6% to between 8% and 10%, while equity checks had also jumped.