Federal Reserve Main Street Loan Facilities and Primary Market Corporate Credit Facility
This guide describes the key provisions of the Main Street Loan Facilities and the Primary Market Corporate Credit Facility (collectively, the “Facilities”) that were recently introduced and expanded by the Federal Reserve and U.S. Treasury, and provides considerations about the programs for borrowers, lenders and other interested parties. Part I provides an Executive Summary; Part II describes the terms of the Main Street Loan Facilities and provides related practical considerations; and Part III describes the Primary Market Corporate Credit Facility and provides related practical considerations.
I. Executive Summary The Board of Governors of the Federal Reserve System (the “Federal Reserve”) has taken significant actions to establish new financing programs in connection with the CARES Act that will directly and indirectly provide, in conjunction with the U.S. Treasury Department (“Treasury”), hundreds of billions of dollars of new financing to small, mid-sized and large business entities. These programs include the Main Street New Loan Facility (“MSNLF”), the Main Street Priority Loan Facility (“MSPLF”) and the Main Street Expanded Loan Facility (“MSELF”), which are intended to provide new financing to small and mid-sized business entities, as well as the Primary Market Corporate Credit Facility (“PMCCF”), which is intended to provide new financing to issuers of investment-grade corporate debt. (In addition, the programs include a Secondary Market Corporate Credit Facility (“SMCCF”) which contemplates the purchase in the secondary market of certain previously-issued corporate bonds and U.S.-listed ETFs to provide liquidity to those asset classes. We do not cover the SMCCF in this summary). On April 9, 2020 the Federal Reserve announced and posted on its website initial term sheets setting forth key terms and conditions for the MSNLF, the MSELF and the PMCCF, and on April 30, 2020 posted revised versions of the MSNLF and MSELF term sheets and an initial term sheet setting forth key terms and conditions for the MSPLF. On April 30 the Federal Reserve also posted on its website an FAQ relating to the MSNLF, the MSPLF and the MSELF (the “Federal Reserve Main Street FAQ”). The Federal Reserve and Treasury will likely make changes to these term sheets and the Federal Reserve Main Street FAQ in the near future and they have reserved the right to make further changes to the terms and conditions of these Facilities. The Federal Reserve Bank of New York posted on its website on May 4, 2020 an FAQ relating to the PMCCF and the SMCCF (the “New York Fed FAQ”). Pursuant to the MSNLF, the MSPLF and the MSELF (the “Main Street Loan Facilities”), Treasury will use funds appropriated to the Exchange Stabilization Fund under Section 4027 of the CARES Act and other existing appropriations to make a $75 billion equity investment in a single common special purpose vehicle in connection with the MSNLF, the MSELF and the MSPLF (the “SPV Loan Participant”). The Federal Reserve
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