Axios Pro: Retail Deals

March 16, 2023

Axios Pro Exclusive Content

Happy Thursday, Retail readers!

✨ Kim is back from India and back in the grind.

📢 Situational awareness: Join Axios business editor Dan Primack and senior deals editor George Moriarty Friday at 1pm ET for a subscriber-exclusive conversation on the state of the SVB fallout and what happens next. Register

1 big thing: SVB's shadow over retail and consumer

Illustration of an upward trending line on a chart as a percent sign

Illustration: Sarah Grillo/Axios

The Silicon Valley Bank fallout may not hurt consumer-facing companies immediately, but is likely to have longer-term consequences, industry sources tell Richard.

Why it matters: While the U.S. government has assured SVB depositors of access to their funds, the accessibility of credit lines is less clear — and consumer-facing companies rely more on revolving credit facilities to finance operations than other industries.

What they're saying: On the sidelines of UBS Global's consumer and retail conference yesterday, Rhône Group principal Patrick Wilson said his firm is looking at portfolio companies' availability on credit lines.

  • SVB also highlights the problem of rising interest rates, says James Gellert, CEO of financial analytic firm RapidRatings.
  • "What SVB did was focus people’s attention on the fact there is dislocation in the credit and capital markets that come from interest rates and inflation," he says.

Context: The fallout's impact on small- to midsized companies and banks could yield distressed situations, says Gellert.

  • CEO of Hilco Corporate Finance Geoffrey Frankel agrees, adding that some purely digital commerce or retail tech companies may have some exposure
  • Note that Fetch was one such company that had money deposited with SVB.

The intrigue: The question is whether SVB is the "canary in the coal mine" for other industries, including consumer and retail, Frankel says.

  • There are relatively few financial institutions concentrated in the retail and CPG industries, he says.
  • "If this is just the first of wave, however, because of unhedged interest rate exposure, it's a different story," Frankel says.

Meanwhile, "General economic conditions could create availability problems," Frankel says.

  • Other forms of financing may gain in popularity to fill the void for companies in need of credit, he says.
  • Hilco, for example, is increasingly advising on and providing credit backed by the value of brand names, a valuable asset often underutilized when it comes to financing, Frankel says.

What we're watching: SVB's impact on alternative credit providers offering credit lines secured by non-traditional or more exotic kinds of assets outside of inventory and receivables.

The big picture: There's nothing like an old-fashioned banking crisis — or the fear of one — to convince consumers to snap their wallets shut.

View archive