The Federal Reserve Releases Additional Guidance on the Loan Facilities Available to For Profit Businesses
Since the launch of the Main Street Lending Program, the Federal Reserve (through the Federal Reserve Bank of Boston, which is implementing the program) issued updates on July 15, 2020 and July 31, 2020 to the Frequently Asked Questions document (“FAQ”), originally published on April 30, 2020, for the three loan facilities available to for profit businesses. Further revisions to the Main Street Lending Program, proposing to expand it to allow non-profit organizations to be able to receive support, were also provided in a Press Release from the Federal Reserve Board dated July 17, 2020. Please see our alert dated July 31, 2020 for a discussion of the two potential loan options for non-profit organizations under the Main Street Lending Program. This alert will focus on the three loan facilities available to for profit businesses. The Main Street Lending Program is the small to mid-size business loan program established by the Federal Reserve and funded, in part, pursuant to the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act signed by President Trump on March 27, 2020.
The Main Street Lending Program is comprised of five facilities that, in the aggregate, may originate up to $600 billion in loans. The three facilities available to for profit businesses are as follows: (i) the Main Street New Loan Facility (“MSNLF”), pursuant to which borrowers may request new single-lender loans; (ii) the Main Street Priority Loan Facility (“MSPLF”), a loan program that permits borrowers to be more highly leveraged and to refinance existing debt; and (iii) the Main Street Expanded Loan Facility (“MSELF”), which is intended to “upsize” existing term loans or revolving credit facilities and may apply to lenders’ interests in syndicated loan facilities. A special purpose vehicle (the “Main Street SPV”) established by the Federal Reserve with $75 billion of committed capital has been created for the purpose of purchasing 95% participation interests in each loan originated under the Main Street Lending Program. The key terms of the Main Street Lending facilities available to for profit businesses are summarized as follows:
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