Federal Reserve Announces MSLP is fully operational and SPV is ready to purchase participations in eligible loans
July 17, 2020
On July 15, 2020, the Federal Reserve (the Fed) announced that the Main Street Lending Program (MSLP) is fully operational now for-profit businesses as the special purpose vehicle (SPV) is ready to purchase a 95% participation in eligible loans that are submitted to the program by registered lenders.
The Fed provided further guidance through an update of its FAQs document including the following:
- A Main Street Priority Loan Facility (MSPLF) may only be used to refinance debt that is owed to a lender other than the eligible lender and the eligible lender’s affiliates.
- Mortgage debt was further clarified as debt that “is solely secured by real property.” This clarification is intended to be incorporated into the definition of mortgage debt under the MSPLF and the Main Street Expanded Loan Facility (MSELF).
- An updated definition of an “Ineligible Business” now includes the Small Business Administration’s (SBA) Interim Final Rules published on June 18, 2020, and June 26, 2020.
- Eligible lenders for the MSELF no longer have to had purchased their interest in the underlying loan before April 24, 2020.
- Sole proprietorships that are not otherwise established under law as an eligible “business” type are not eligible to participate in MSLP.
- Provision of several matters, including,
- The inclusion of fees in the principal amount of loan,
- LIBOR floors,
- Financial requirements for businesses established in 2020,
- Fiscal year 2019 financial data,
- Use of proceeds under Main Street loans,
- Eligibility of sole proprietorships,
- Hedging credit and interest rate risk,
- Clarifications on portal information security measures, and
- Links to example legal documents completed for a hypothetical company.
For more information, please feel free to contact:
- Michael Levy, Partner-in-Charge, Private Equity and Transaction Advisory Services, at (770) 353-7168 or ([email protected])
- Bill Dupee, Director, Transaction Advisory Services, at (770) 353-2819 ([email protected])
More about the Main Street Lending Program
The Federal Reserve established the Main Street Lending Program to provide crucial financial assistance to small-and medium-sized companies affected by the coronavirus pandemic, The Main Street Lending Program establishes three different loan types for eligible companies, including new loans, priority loans, and expanded loans.
Businesses with up to 15,000 employees, or up to $5 billion in annual revenue, are eligible for the program. Below is a summary of the lending program:
|Main Street Lending Program Loan Options||New Loans||Priority Loans||Expanded Loans|
(previously 4 years)
|Minimum Loan Size||$250,000
|Maximum Loan Size||The lesser of $35M, or an amount that, when added to outstanding and undrawn available debt, does not exceed 4.0x adjusted EBITDA
|The lesser of $50M, or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA
|The lesser of $300M, or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA
|Risk Retention||5%|| 5%
|Principal Repayment||Principal deferred for two years, years 3-5:
15%, 15%, 70%(previously principal deferred for one year and 33.33% repayment due in years 2-4)
|Principal deferred for two years, years 3-5:
15%, 15%, 70%(previously principal deferred for one year and 15%, 15%, 70% repayment due in years 2, 3, and 4, respectively)
|Interest Payments||Deferred for one year|
|Rate||LIBOR + 3%|
Note – Information hereon is based on draft term sheets issued by Federal Reserve on June 8, 2020. Aprio will continue to monitor announcements from Federal Reserve and will update terms as amendments and changes are announced.