On Monday, June 8, 2020, the Federal Reserve Board announced changes to the Main Street Lending Program intended to allow a greater number of small and medium sized businesses to participate in the program. The Federal Reserve reiterated its intention to open the program for applications in the near future, and soon thereafter actively buy loans extended under the program.
In previous articles, we discussed the features of the Main Street Lending Program as of April 30 and program requirements subsequently announced on May 27.
This article focuses on the June 8 modifications to the Main Street Lending Program including changes that relate to loan term, minimum/maximum loan size, risk retention and principal repayment. The Fed, which has not lent directly to businesses since the Great Depression, has sought public comment concerning the Main Street Lending Program and continues to modify the program’s terms and conditions.
The Main Street Lending Program has been modified in the following ways:
- Term: The term for all Main Street Lending Program loans has been increased to five (5) years, from the previous four (4) years.
- Minimum Loan Amount: The minimum loan amount under both the Main Street New Loan Facility (MSNLF) and Main Street Priority Loan Facility (MSPLF) is reduced to $250,000, from the previous $500,000. The minimum loan amount under the Main Street Expanded Loan Facility (MSELF) remains $10 million.
- Maximum Loan Amounts:
- MSNLF: The lesser of $35 million (previously $25 million), or an amount that, when added to outstanding and undrawn available debt, does not exceed 4.0x adjusted EBITDA.
- MSPLF: The lesser of $50 million (previously $25 million), or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA
- MSELF: The lesser of $300 million (previously $200 million), or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA.
- Loan Deferral: Principal payments under all loan programs shall be deferred for two (2) years rather than the previous one (1) year.
- Risk Retention/Fed Participation: The Federal Reserve Bank will participate in 95% of all Main Street Loan Programs (previously, only 85% of MSPLF).
Interest payments on all Main Street Loan Program loans remain deferred for one (1) year and shall accrue interest at a rate of Libor + 3%.
In connection with the announced changes, the Fed also released revised Term Sheets for the Main Street New Loan Facility (MSNLF), Main Street Priority Loan Facility (MSPLF) and Main Street Expanded Loan Facility (MSELF).
Additional Information
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