On April 9, 2020 the Federal Reserve unveiled general details of the Main Street Lending program to assist businesses negatively impacted by the COVID-19 pandemic. This program is available to a wide-variety of middle-market companies and should be of particular interest to those involved in the Oil & Gas, hospitality, and manufacturing industries. Key information provided by the Federal Reserve is as follows:

Eligibility for the Main Street Lending Program:

    • The program will be available for businesses with up to
      • 10,000 employees or
      • $2.5 billion in 2019 annual revenue
    • Must be US domiciled business with significant operations within – and a majority of its employees based – in the United States.

Loan Facilities:

    • Main Street Expanded Loan Facility (MSELF): Maximum loan size that is the lesser of (i) $150 million, (ii) 30% of the eligible borrower’s existing outstanding and committed but undrawn bank debt, or (iii) an amount that, when added to the eligible borrower’s existing outstanding and committed but undrawn debt, does not exceed six times the eligible borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (“EBITDA”);
    • Main Street New Loan Facility (MSNLF): Maximum loan size that is the lesser of (i) $25 million or (ii) an amount that, when added to the eligible borrower’s existing outstanding and committed but undrawn debt, does not exceed four times the eligible borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (“EBITDA”);

Loan Terms of the Main Street Lending Program:

    • Maturity – 4 years; 12 month deferral of principal and interest payments. No prepayment penalty
    • Rate – Fed Funds Rate + 250- 400 basis points
    • Collateral
      • MSELF – unsecured
      • MSNLF – lender discretion

Other Key Factors:

    • Businesses are eligible for a Main Street loan even if they have previously applied for a Paycheck Protection Program (PPP) loan.
    • Main Street Funds may be used to originate a new debt or to increase the size of existing loans to businesses
    • Eligible banks include all US financial institutions

Additional Requirements:

Borrowers seeking to participate in the Main Street Lending program are subject to certain provisions associated with the granting of such funds. These include:

  • Limitations on stock repurchases, capital distributions, compensation increases and debt reduction
  • A commitment to make reasonable efforts to maintain payroll and retain employees during the term of the loan
  • Borrowers must attest to certain conditions, including a direct statement that the borrower requires financing due to the exigent circumstances presented by the COVID-19 pandemic

 

Details will continue to come together in the upcoming days and we expect this program to materialize as swiftly as the recently announced Payroll Protection Program. Please join us on for our webinar on Friday, April 24 to discuss the most recent events and address any questions you might have.

 

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