Update: For information on the most recent developments in the Main Street Lending Program (MSLP), see our November 25, 2020, alert.
On July 6, 2020, the Federal Reserve Bank of Boston announced that it is now ready to purchase 95 percent participations in eligible loans submitted by registered lenders under the Main Street Lending Program (MSLP).
The Federal Reserve established the MSLP to support lending to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic and that currently meet underwriting requirements applied by eligible lenders in accordance with the program. Under the MSLP, the Federal Reserve Bank of Boston has formed MS Facilities LLC as a special purpose vehicle (Main Street SPV) to purchase up to $600 billion of participations in eligible loans. McGuireWoods’ previous client alerts (from May 1, May 29, June 12 and June 18) summarize the term sheets, guidance and form documents issued and revised by the Federal Reserve for the MSLP’s three existing facilities: the Main Street New Loan Facility, the Main Street Priority Loan Facility (MSPLF) and the Main Street Expanded Loan Facility.
The opening of the MSLP for loan submission follows the opening of lender registration on June 15, 2020, and the issuance of incremental guidance on June 20 and 26, 2020. In the most recent incremental guidance, the Federal Reserve provides additional details about required borrower financial information and other inputs required by the lender portal and about calculating total compensation for purposes of limits on a borrower’s employee compensation under the program’s direct-loan restrictions. Earlier incremental guidance discusses how lending limits apply to MSLP loans, what level of diligence is required of lenders in making a required conflicts-of-interest certification and how debt that will be refinanced by an MSPLF loan should be counted in a borrower’s calculation of its existing outstanding and undrawn available debt.
In connection with the announcement, the Federal Reserve Bank of Boston updated the lender instructions for required loan documentation. Those instructions provide detailed information for lenders about the completion and submission of transaction-specific information and documents. Except as noted below, the Main Street SPV may purchase participations in eligible loans until Sept. 30, 2020.
In submitting a loan for the purchase of a participation by the Main Street SPV, a lender must indicate whether the loan was made in reliance on the term sheets issued April 30, 2020 (which provide, among other terms that have since been updated, for four-year term loans) or the term sheets issued June 8, 2020. Eligible loans made in reliance on the term sheets issued April 30, 2020, and funded on or before June 10, 2020, will be accepted for purchase by the Main Street SPV only during the first 14 days of the MSLP’s operation, commencing July 6, 2020.
The Federal Reserve Bank of Boston also announced that it intends to publish a state-by-state listing of eligible lenders that are accepting new business customers under the MSLP and have elected to be listed.
McGuireWoods has published additional thought leadership analyzing how companies across industries can address crucial business and legal issues related to COVID-19.