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Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

June 9, 2020

Main Street Lending Program Expansion: Updated Term Sheets

On June 8, in an effort to make the Main Street Lending Program (MSLP) more attractive for borrowers and lenders, the Federal Reserve Board released new term sheets for the Main Street New Loan Facility (MSNLF) the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF).

Set up by the Federal Reserve Bank of Boston, a special purpose vehicle (SPV) was to purchase between 85 and 95 percent of each eligible loan from lenders. To make this program more appealing to lenders, the term sheets now state the SPV will purchase 95 percent across all three facilities, thereby limiting lenders’ risk and potential liability as well as freeing up additional capital lenders can use to make other loans.

The eligibility requirements for borrowers remain unchanged and are the same under all three programs. Eligible borrowers are business that:

Were established prior to March 13, 2020

Have 15,000 or fewer employees or had 2019 annual revenues of $5 billion or less

Are created or organized in the United States with significant operations and a majority of employees in the United States

Haven’t received specific support under Subtitle A of Title IV of the CARES Act

Borrowers may participate in both the Paycheck Protection Program and the MSLP but may only participate in one of the MSLP branches of the MSNLF, MSPLF, MSELF, or the Primary Market Corporate Credit Facility.

All three facilities now have the same following features:

  • Five-year maturity
  • Principal payments deferred for two years
  • Interest payments deferred for one year (any unpaid interest will be capitalized)
  • A floating interest rate of LIBOR (one or three month) plus 300 basis points
  • 15-percent principal amortization at the end of the third year, 15 percent at the end of the fourth year, and a balloon payment of 70 percent at maturity at the end of the fifth year
  • Prepayment without penalty

The highlights of the new MSNLF term sheet are as follows:

An eligible loan is a secured or unsecured term loan that was originated after April 24, 2020.

Minimum loan size is $250,000

Maximum loan size is the lesser of:

$35 million

An amount that, when added to the eligible borrower’s existing outstanding and undrawn available debt, doesn’t exceed four times the eligible borrower’s adjusted 2019 earnings before interest, taxes, depreciation, and amortization (EBITDA)

The MSNLF may not, at the time of origination or any time during the term of the loan, be contractually subordinated in terms of priority to any of the borrower’s other loans or debt instruments.

The highlights of the MSPLF term sheet are as follows:

  • An eligible loan is a secured or unsecured term loan that was originated after April 24, 2020.
  • Minimum loan size is $250,000
  • Maximum loan size if the lesser of :
  • $50 million
  • An amount that, when added to the eligible borrower’s existing outstanding and undrawn available debt, doesn’t exceed six times the eligible borrower’s adjusted 2019 EBITDA
  • The MSPLF must be, at the time of origination or any time during the term of the loan, be senior to or pari passu with, in terms of priority and security, the borrower’s other loans or debt instruments other than mortgage debt.

The highlights of the MSELF term sheet are as follows:

  • An eligible loan is a secured or unsecured term loan or revolving credit facility that was originated on or before April 24, 2020 and has a remaining maturity of at least 18 months, as long as the upsized amount of the loan is a term loan.
  • Minimum loan size is $10 million
  • Maximum loan size is the lesser of:
    • $300 million
    • An amount that, when added to the eligible borrower’s existing outstanding and undrawn available debt, doesn’t exceed six times the eligible borrower’s adjusted 2019 EBITDA
  • The MSELF must be, at the time of upsizing and at all time the additional amount is outstanding, senior to or pari passu with, in terms of priority and security, the borrower’s other loans or debt instruments other than mortgage debt.

If you have any questions regarding the content of this alert, please contact Roger Cominsky, Financial Institutions & Lending Practice Area chair, at rcominsky@barclaydamon.com; Danielle Katz, associate, at dkatz@barclaydamon.com; or another member of the Financial Institutions & Lending Practice Area.

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