On 27 May 2020, the Federal Reserve issued new FAQs regarding its Main Street Lending Program, which replace the FAQs issued on 30 April 2020. At the same time, the Federal Reserve Bank of Boston (FRBB), which is administering the program, published several form documents and other model provisions that are relevant to the program.
The Main Street Lending Program is intended to provide credit to small and medium-sized US businesses that were in sound financial condition before the COVID-19 pandemic.
The program includes three loan facilities, the Main Street New Loan Facility (MSNLF), the Main Street Expanded Loan Facility (MSELF) and the Main Street Priority Loan Facility (MSPLF). All three facilities are being provided under Section 13(3) of the Federal Reserve Act. Each facility is structured so that the Federal Reserve Bank of Boston will lend to a single special purpose vehicle (SPV) on a recourse basis. The SPV will purchase participations in eligible loans made by eligible lenders.
The new FAQs and documents clarify many issues that the market had raised, particularly concerning the role that the SPV will play in holding loans, such as the voting rights that the SPV will have and whether the SPV’s participation can be elevated into an assignment. However, the new information also includes new requirements, and indicates that borrowing and lending under the Main Street program will likely be a complicated undertaking.
Authors: José Antonio Morán, Craig Roeder, J. Brooke Mestre, Matthew Nochowitz and Carlos Suarez.
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