Phone 208.344.6000 Email info@hawleytroxell.com
Hawley Troxell Facebook Hawley Troxell LinkedIn Hawley Troxell RSS Feed

Federal Reserve Releases Term Sheets for Main Street Lending New Loan Facility and Main Street Expanded Loan Facility programs

Added by Kenneth C. Howell in Articles & Publications, Banking Law, News on April 10, 2020

The Federal Reserve today released details on the Main Street New Loan Facility (“MSNLF”) and Main Street Expanded Loan Facility (“MSELF”) programs funded with up to $600 billion as part of the CARES Act.

MSNLF and MSELF are loans to be repaid, unlike the Paycheck Protection Program with its loan forgiveness feature. These facilities are, however, offered with attractive terms. The MSNLF is, as its name implies, a new loan; the MSELF loans are upsized tranches of existing loans, but the upsized tranche will have the features noted in the table below.

The features of the MSNLF and MSELF are summarized in the following table:

MSNLF MSELF
Eligible Borrowers Businesses up to 10,000 employees or up to $2.5 billion in 2019 annual revenue. Business must be one created or organized in the US or under the laws of the US with “significant operations in and a majority of its employees based in the US. Businesses up to 10,000 employees or up to $2.5 billion in 2019 annual revenue. Business must be one created or organized in the US or under the laws of the US with “significant operations in and a majority of its employees based in the US. Cannot participate in the MSNLF. Borrower must have an existing term loan made by an Eligible Lender originated before April 8, 2020.
Maximum Loan Size Lesser of (i) $25 million or (ii) an amount that, when added to the borrower’s existing outstanding and committed but undrawn debt, does not exceed four times the borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (“EBITDA”) Lesser of (i) $150 million (ii) 30% of the borrower’s existing outstanding and committed but undrawn bank debt, or (iii) an amount that, when added to the borrower’s existing outstanding and committed but undrawn debt, does not exceed six times the borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (“EBITDA”)
Minimum Loan Size $1 million $1 million
Term 4 year maturity 4 year maturity
Principal and Interest Deferral Amortization of Principal and Interest deferred for one year Amortization of Principal and Interest deferred for one year
Interest Rate SOFR + 250-400 basis points SOFR + 250-400 basis points
Fees Origination fee of 100 basis points of the principal amount of loan Origination fee of 100 basis points of the principal amount of upsized tranche of the loan
Prepayment Prepayment permitted without penalty Prepayment permitted without penalty
Required Borrower Attestations
  1. Refrain from using the proceeds to repay other loan balances
  2. Commit to refrain from repaying other debt of equal or lower priority (excepting mandatory principal payments) unless the MSLF loan is repaid in full
  3. Must not cancel or reduce any other lines of credit
  4. Financing is required due to exigent circumstances of COVID-19
  5. Using proceeds of the MSLF loan, it will make reasonable efforts to maintain its payroll and retain its employees during the term of the loan
  6. Must follow compensation, stock repurchase and capital distribution restrictions imposed by section 4003(c)(3)(A)(ii) of the CARES Act
  7. No conflicts of interest pursuant to section 4019(b) of the CARES Act
  1. Refrain from using the proceeds of the upsized tranche to repay other loan balances
  2. Commit to refrain from repaying other debt of equal or lower priority (excepting mandatory principal payments) unless the MSELF loan is repaid in full
  3. Must not cancel or reduce any other lines of credit
  4. Financing is required due to exigent circumstances of COVID-19
  5. Using proceeds of the upsized tranche of the MSELF loan, it will make reasonable efforts to maintain its payroll and retain its employees during the term of the loan
  6. Must follow compensation, stock repurchase and capital distribution restrictions imposed by section 4003(c)(3)(A)(ii) of the CARES Act
Expiration
September 30, 2020 September 30, 2020

 

The Federal Reserve is taking a more measured approach to the roll-out of MSNLF and MSELF programs, and thus these programs are proceeding at a slower rate than we experienced with the PPP program. Hopefully this means there will be more fulsome guidance and clarity when lenders begin working with the program.

As this information was just released the morning of April 9, Hawley Troxell will continue to update this resource as details emerge.

This Client Alert has been prepared by Hawley Troxell Ennis & Hawley, LLP for informational purposes only and is not legal advice, a legal opinion or counsel. Readers receiving information through this Client Alert should not act on or rely on it without consulting professional legal counsel. Any such opinions, advice or counsel are dependent upon the application of the law to the particular facts and circumstances of any given situation, and should be given by a licensed attorney in the exercise of his or her professional judgment only after the establishment of an attorney-client relationship and based upon the exercise of the attorney’s professional judgment after consideration of such facts and circumstances. The furnishing of this Client Alert does not constitute or give rise to an attorney client relationship.

 


Hawley Troxell continues to monitor the developments related to COVID-19.

Resources & Information »