COVID-19 – The Main Street Lending Program: New May 2020 Guidance and Forms from Federal Reserve Bank of Boston
As discussed in our previous Client Alert, The Main Street Lending Program (“Main Street” or the “Program”) is a financial assistance program established by the Board of Governors of the Federal Reserve System to support small and medium-sized businesses affected by the COVID-19 pandemic. Although the Program was announced shortly following the enactment of The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and incorporates certain of its terms, the Program is actually an emergency lending program established by the Federal Reserve under section 13(3) of the Federal Reserve Act.
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 (the “Expanded Facility” or “MSELF”). A special purpose vehicle (“SPV”) formed by the Federal Reserve will purchase 85% or 95% participations in these loans. Please consult our previous Client Alert for additional details on the Program terms previously announced.
On May 27th, 2020, the Federal Reserve Bank of Boston (which is administering the Program) issued a revised Frequently Asked Questions (“FAQ”) document on the Program, which updated the prior April 30th FAQ guidance, along with forms of various documents required for the Program, including the forms of loan participation agreement, co-lender agreement, loan servicing agreement, borrower and lender transaction certifications and covenants, and lender registration materials. This Client Alert summarizes certain of the more significant clarifications and updates to the Program terms previously announced.
The Federal Reserve is currently working to create the infrastructure necessary to operationalize the Program, which is anticipated to launch in the first week of June.