MDO | ALERTS
MDO | ALERTS
Main Street Lending Program Overview
■ ■ ■ April 28, 2020
In an effort to expand its funding for small and mid-sized businesses with the goal of helping the economy through the COVID-19 pandemic, the Federal Reserve Board has announced that it will establish the Main Street Lending Program ("MSL"). MSL will operate through two facilities: the Main Street New Loan Facility (MSNLF) and the Main Street Expanded Loan Facility (MSELF). The combined size of the two facilities will be up to $600 billion. A Federal Reserve Bank will commit to lend to a special purpose vehicle ("SPV") on a recourse basis. The SPV will purchase 95% participation in eligible loans made by eligible lenders and the eligible lenders will retain 5% of each loan.
Who is Eligible?
A business qualifies for the MSL if:
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It has up to 10,000 employees or up to $2.5 billion in 2019 annual revenues;
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It is created or organized in the United States or under the laws of the United States and has significant operations in, and a majority of its employees based in, the United States; and
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It was in good financial standing prior to the COVID-19 outbreak.
Businesses may participate in the MSNLF or the MSELF but not both and the MSL is not open to borrowers that already participated in the Federal Reserve's Primary Market Corporate Credit Facility.
Loan Information
Required Attestations
Under both MSNFL and MSELF, borrowers must make the following attestations:
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It commits to refrain from (i) using loan proceeds to repay other loan balances including outstanding lines of credit with the eligible lender, and (ii) repaying other debt of equal or lower priority, with the exception of mandatory principal payments, unless the loan it is financing under the MSL Program has been repaid in full.
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It requires financing due to the exigent circumstances presented by the COVID-19 pandemic, and that, using the proceeds of the loan, it will make reasonable efforts to maintain its payroll and retain its employees during the term of the loan.
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It meets the applicable EBITDA leverage conditions in the table above under "Maximum Loan Size".
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It will follow compensation, stock repurchase, and capital distribution restrictions that apply to direct loan programs under section 4003(c)(3)(A)(ii) of the CARES Act.
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It is eligible to participate in the relevant facility, including in light of the conflict of interest prohibitions in section 4019(b) of the CARES Act.
How to Apply?
Businesses will be able to apply for loans under the Main Street Lending Programs through U.S. insured depository institutions, U.S. bank holding companies, and U.S. savings and loan holding companies.
When Can You Apply?
No information is available yet on when you can apply. The Federal Reserve Board is currently reviewing comments it received suggesting potential changes.
Our attorneys at MDO Partners are closely monitoring the information released and guidelines issued with regard to the Main Street Lending Program. We will be issuing an updated alert when more information is available. In the meantime, click here for information on other loan programs currently available.
About MDO Partners
MDO Partners is a boutique law firm that focuses on Corporate, International, and Real Estate Law, as well as Global Compliance and Business Ethics. The firm is comprised of a solid team of attorneys and advisors with more than 100 years of combined experience who are committed to the business goals and best interests of their clients. The firm delivers value-added services of the highest caliber and serves as a trusted advisor to its clients with a practical and business-savvy approach. For more information on MDO Partners, please visit www.mdopartners.com.
If you have questions or comments regarding this Alert, please contact one of the attorney's or advisor's listed below.
Richard Montes de Oca
Managing Partner
305.704.8452
Claudia Herbello
Associate Counsel
305.704.8456
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