Good morning. How many pins must fall before you call it a frame? So far four banks have either failed or have been buoyed by rescue efforts, ranging from giant size with Credit Suisse to not so big with Signature Bank. We’ve seen lists suggesting there may be others with significantly risky balance sheets and exposure to the Fed’s interest rate moves.

But the focus here remains on Silicon Valley Bank and the still-fluid issues its collapse last week raised for venture-, growth- and private-equity firms and their portfolio companies.

One prominent aspect of that remains the extent to which the new Silicon Valley Bank will seek to enforce venture debt covenants that require clients to keep their deposits and other bank services with the bank. Our colleagues Yuliya Chernova and Angus Loten report that the new people in charge there are indicating some flexibility on that score.

Meanwhile, First Republic Bank represents the latest pin to fall with a $30 billion rescue net catching it thanks to a bunch of bigger and better capitalized lenders, as our Journal colleagues report.

Finally, I report Wall Street compensation analyst Alan Johnson is forecasting another down year for private-equity bonuses, except for maybe the people at the very largest firms. He’s predicting a drop of around 10% in incentive pay this year.

For these and many more stories, please read on…

Bonuses for private-equity executives will fall this year after declining across much of the industry in 2022, with the heaviest cuts seen for smaller and midsize firms, Ted Bunker reports for WSJ Pro Private Equity, citing Alan Johnson, managing director of Wall Street compensation consulting firm Johnson Associates Inc. The largest buyout shops may, however, escape unscathed, Mr. Johnson said during a virtual presentation seen by The Wall Street Journal. “Unfortunately 2023 we think is going to be another down comp year,” he told clients during the presentation. “Probably down about 10% on incentives. Base salaries will go up about 3.5%.”

Startups and investors say the newly created entity that took over from Silicon Valley Bank is offering some flexibility when it comes to deposit requirements for borrowers, WSJ Pro Venture Capital’s Yuliya Chernova and Angus Loten write. Silicon Valley Bridge Bank NA in individual instances is easing a provision that startups must keep all of their capital with the bank as part of their loan agreements, borrowers and investors say. The bank is also moving to forgo penalties for borrowers who moved money out of the bank in recent days, in technical violation of their borrowing covenants.

The biggest banks in the U.S. swooped in to rescue First Republic Bank with a flood of cash totaling $30 billion, in an effort to stop a spreading panic following a pair of recent bank failures. JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. are each making a $5 billion uninsured deposit into First Republic, the banks said in a statement, confirming an earlier report by The Wall Street Journal. Morgan Stanley and Goldman Sachs Group Inc. are kicking in $2.5 billion apiece, while five other banks are contributing $1 billion each.

Midmarket firm Court Square Capital Partners is investing in Five Star Parks & Attractions, which develops and operates family entertainment centers, according to a press release. The company’s brands include The Track Family Fun Parks, Celebration Station, Xtreme, Speed Zone, LazerPort, Malibu Jack’s and Craig’s Cruisers, the release stated.

Newly created Ethical Capital Partners in Ottawa, Ontario said it has acquired adult entertainment company MindGeek SARL. The Luxembourg-based company’s operations include pornographic websites. The private-equity firm was established last year to invest in “industries that require principled ethical leadership,” according to a news release.

BlackRock Inc.’s alternatives strategy has acquired a stake in Lake Turkana Wind Power Ltd. in Kenya from Finnfund, a development financing provider and impact investor, according to a news release. BlackRock invested through its Climate Finance Partnership. The project includes 365 turbines each capable of generating 850 kilowatts.

CVC Capital Partners is backing Indonesian industrial gas supplier PT Samator Indo Gas Tbk, acquiring a minority stake with a $155 million growth investment from the firm’s Asia V fund, according to a news release. The company remains under the control of majority owner the Harsono family.

LongueVue Capital said it has recapitalized RBW Logistics alongside the company’s president and chief executive. The deal also provided the Augusta, Ga.-based business with growth financing, according to a news release.

Our add-on deal interactive tool allows you to sort and analyze volumes of add-on deal data compiled by WSJ Pro. View more.

Silicon Valley Bank used financial sweeteners and strategic networking to attract venture capitalists and their nascent tech companies, The Wall Street Journal reports. That strategy powered spectacular growth for decades—and left the sector extraordinarily vulnerable when the bank collapsed. Founded in 1983, the bank offered services to startups that often weren’t profitable, in some cases didn’t even have a product, and would otherwise have a hard time getting a line of credit or a loan from a larger bank. Venture-capital firms banked with Silicon Valley Bank too, often encouraging their portfolio companies to do the same.

SoftBank Group Corp. isn’t a bank, but the Japanese company—which has bankrolled many technology startups—will still be rocked by the seismic waves triggered by the collapse of Silicon Valley Bank, Jacky Wong reports for The Wall Street Journal. Shares of the Japanese tech investor have lost 14% in the past week. Some of the worst potential outcomes for SoftBank—such as mass failures of startups it has backed—seem unlikely after the U.S. government stepped in this week to fully guarantee the bank’s deposits, which are mostly from startups and venture-capital funds. Given how central the bank is to the tech industry—it served nearly half of U.S. VC-backed tech and life sciences companies—SoftBank will still suffer from the aftermath. For one, the imbroglio could deal another blow to startup valuations when new funding for the industry is already drying up.

Bids for Silicon Valley Bank and Signature Bank are due by today, under a process designed to favor traditional banks, Reuters reports, citing people familiar with the matter. The Federal Deposit Insurance Corp. failed with its first auction attempt for Silicon Valley Bank last week and has limited access to financials for both institutions to companies with current bank charters. The FDIC has retained investment bank Piper Sandler Cos. to run the new Silicon Valley Bank auction, the people said.

Even with a lifeline provided by U.S. regulators to guarantee deposits beyond the usual limits after Silicon Valley Bank failed Friday, many startups may not make it to 2024 as funding becomes more difficult to secure, MarketWatch reports, citing a Morgan Stanley analysis. While regulators have guaranteed all deposits, “the medium-term cash burn issue of start-ups remains as pertinent as it was a week ago,” Morgan Stanley strategist Edward Stanley said in a note on Thursday. With about 4 million U.S. employees at companies funded by venture capital, and about 12 million at private-equity-owned companies, the strategist calculated that unicorns—startups with a valuation of more than $1 billion—would need $300 billion, while startups with a valuation under $1 billion would need another $250 billion in 2023 “simply to stand still.”

Bain Capital’s John Connaughton, a co-managing partner, said the typical cost of debt to finance deals has risen to 8% to 10% from around 5% to 6% previously, in a Reuters Newsmaker interview on the effects of the Silicon Valley Bank collapse. He said those costs have risen because most banks have shut off buyout financing, leading firms to borrow from private credit providers.

Brentwood Associates, a midmarket firm focused on business services and consumer sectors, is seeking $1.25 billion for Brentwood Associates Private Equity VII LP and a related parallel fund, a regulatory filing indicates. Los Angeles-based Brentwood raised $1.15 billion for its sixth main private equity fund back in 2017, according to the firm’s website. However, last year, the firm also raised $190 million for Brentwood Associates Opportunities Fund LP to acquire legacy assets from two prior funds and provide investors in those funds with liquidity, the website stated.

Bluestone Investment Partners, a lower midmarket firm focused on investments in defense and government services businesses, has raised $196 million for Bluestone Investment Partners III LP, according to an emailed press release. Bluestone typically invests in companies with $15 million to $100 million in revenue and up to $10 million of earnings before interest, tax, depreciation and amortization, according to the firm’s website.

Patient Square Capital has tapped John Marotta as an executive in residence at the healthcare-focused private-equity firm to help it pursue investments in life science tools and diagnostics companies, according to a press release. Mr. Marotta most recently served as president and chief executive of diagnostics and medical device company PHC Holdings Corp.,the release stated.

Law firm Sidley Austin has hired James MacArthur and Ed Freeman as partners in the firm’s London office, according to Financial News, a publication also owned by Dow Jones. Both attorneys previously focused on infrastructure and private equity in the London office of Weil Gotshal & Manges.

A child-labor fine at a sanitation company backed by private market investment giant Blackstone Inc. is drawing scrutiny from top officials at the nation’s largest pension funds, Heather Gillers reports for The Wall Street Journal. “How are we going to align with our partners, our fund managers around private equity, because we all heard the sad story about children…being used to clean slaughterhouses at night,” asked California Public Employees’ Retirement System board member Ramón Rubalcava during an investment committee meeting Monday.

Tiger Global marked down the value of its investments in private companies by about 33% across its venture-capital funds in 2022, Juliet Chung and Eliot Brown write for The Wall Street Journal, citing people familiar with the firm. The markdowns erased $23 billion in value from Tiger’s giant holdings of startups around the globe, one of the people said. Its private portfolio includes big bets on hundreds of companies including TikTok parent ByteDance and payments company Stripe. While substantial, the markdowns—including $9 billion in the second half of the year—highlight the lag in private markets compared with similar fast-growing public companies.

AnaCap Financial Partners said it earned a fourfold return on its investment in Oona Health with the sale of the Danish healthcare services and insurance provider to life insurer Topdanmark A/S. The firm first invested in Oona in 2019 and said the sale also generated a 40% internal rate of return along with the fourfold multiple of the capital invested.

A group of minority lenders to Mitel Networks Corp. is suing Apollo Global Management Inc., Anchorage Capital Group and other rival creditors, alleging the Canadian communication company’s private-equity owner favored the interests of its majority lenders in a restructuring deal, Becky Yerak writes for WSJ Pro Bankruptcy.

National CineMedia Inc., the largest movie-theater advertising business in North America, is negotiating to hand control to senior lenders as part of a planned bankruptcy filing, WSJ Pro Bankruptcy’s Alexander Gladstone, Soma Biswas and Andrew Scurria report, citing people familiar with the matter. The company, which owes roughly $1.1 billion in debt, is in an extended grace period after missing interest payments owed to its bondholders last month. Negotiations with creditors have focused on reaching a prearranged restructuring deal that could be implemented through chapter 11, the people familiar with the matter said. The company is expected to continue operating as usual.

Private-equity investors are increasingly afraid that the value of their fund holdings, which declined last year compared to 2021, might drop further this year, WSJ Pro Private Equity’s Luis Garcia reports for Dow Jones Newswires, citing a survey by data provider Preqin Ltd. About half, or 53%, of the survey’s respondents viewed private equity as overvalued, up from 48% for the same survey a year earlier, the research provider says. “This apparent contradiction between the view that private equity is increasingly overvalued, despite valuations falling, suggests that the market agrees that private-equity positions are due [to] more write downs in the coming quarters.” Preqin adds that 60% of the respondents believe private-equity performance will deteriorate in the coming year compared with the prior 12 months.

Publicly traded asset manager Wendel SE in Paris aims to become a more hands-on investor under an active portfolio management strategy the firm plans to set up this year, an investor presentation shows. Wendel intends to invest around €2 billion, or roughly $2.12 billion, through the strategy within two years, making initial commitments of €300 million to €600 million in Western Europe and North American businesses with a preference for majority stakes in private companies, the document indicates.

• Silicon Valley Bank’s collapse and the threat of other troubled banks are “a wake-up call” to financial markets and companies that the Fed’s rate hikes have consequences. It may be a blessing in the disguise of a bank run.
• Tech executives discussed the implications of the SVB collapse in a panel discussion at a CIO Network event.
• It's no longer enough that sustainability chiefs know the technical stuff. They also need to be influencers and transformation leads for their companies.
• Retailers including Walmart and Whole Foods are pushing for lower prices from suppliers, leveraging their buying power now that supply-chain constraints have eased.

Send us your tips, suggestions and feedback. Write to:

Maria Armental; Ted Bunker; Chris Cumming; Luis Garcia; Rod James; Laura Kreutzer; Chitra Vemuri.

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