COVID-19 – The Main Street Lending Program: Federal Reserve Board Revises Key Terms of Main Street Lending Program, Updates FAQs and Launches Lender Registration

Wednesday, June 17, 2020

The Main Street Lending Program (the “Program”) is a financial assistance program established by the Board of Governors (the “Board”) of the Federal Reserve System to support small and medium-sized businesses affected by the COVID-19 pandemic. The Program authorizes eligible lenders to originate up to $600 billion in eligible loans through three separate facilities - the Main Street New Loan Facility (the “New Facility”), the Main Street Priority Loan Facility (the “Priority Facility”), and the Main Street Expanded Loan Facility (“MSELF”). A special purpose vehicle (“SPV”) formed by the Federal Reserve will purchase 95% participations in these loans. Unlike loans made under the Paycheck Protection Program (“PPP”), loans originated under the Program are full recourse loans and are not forgivable. Please consult our previous Client Alerts on the April 30th Program Guidance and May 27th Program Guidance for additional details on the Program terms previously announced. 

On June 8th, 2020, the Board issued revised term sheets for the three Program facilities, enacting a number of substantive changes to the prior April 30th term sheets. These changes were intended to expand both the universe of potential borrowers for the Program and the appeal of the loan terms. In addition, although not announced in its press release, the “Frequently Asked Questions” for the Program was also updated to reflect the revised term sheets and to provide certain other clarifications and guidance. 

On June 11th, the Federal Reserve updated various Program forms and documents to align with these changes, including the forms of loan participation agreement, co-lender agreement, borrower certifications and covenants and lender transaction certifications and covenants. This Client Alert includes both the term sheet revisions discussed in our previous Client Alert on the June 8th Term Sheets Guidance, as well as a summary of the June 8th revisions to the “Frequently Asked Questions” for the Program and June 11th document updates.

Effective as of June 15th, the Federal Reserve’s Main Street Lending Program is open for lender registration. Accordingly, it is advisable for any lender anticipating to originate any loans under to the Program to initiate the process by registering to confirm its status as an “Eligible Lender”. Interested lenders can register by submitting Lender Registration Certifications and Covenants and Lender Wire Instructions through the Program's lender portal.

The Program is anticipated to be actively buying Main Street loans soon. The Program will also accept loans that were originated by an Eligible Lender under the previously announced terms, if funded before June 10th. Any loans issued in reliance on the April 30th term sheets may be amended or refinanced in accordance with the June 8th terms.

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