1. Background

 On July 17, 2020, the Federal Reserve Board announced that it was taking additional actions to facilitate greater access to credit through the Main Street Lending Program ("MSLP") for nonprofit organizations, such as educational institutions, hospitals, and social service organizations.1 On July 28, 2020, it also announced an extension through December 31, 2020 of what are now five lending facilities under the MSLP.2

  1. Main Street Lending Program for Nonprofit Organizati

 The MSLP was expanded to include two new lending facilities for nonprofit organizations, namely the Nonprofit Organization New Loan Facility ("Nonprofit New Loan Facility") and Nonprofit Organization Expanded Loan Facility ("Nonprofit Expanded Loan Facility"). The terms under these facilities generally mirror those under the corresponding Main Street New Loan Facility ("New Loan Facility") and Main Street Expanded Loan Facility ("Expanded Loan Facility") for for-profit entities (whereby a special purpose vehicle ("SPV") established by the Federal Reserve Bank of Boston will commit to purchase 95% participations in eligible loans to these organizations), and other attributes (such as the universe of eligible lenders) are the same as well, but there are some important differences. The term sheets for the Nonprofit New Loan Facility and Nonprofit Expanded Loan Facility are attached as Annexes A and B, respectively.

 Nonprofit organizations seeking to obtain such loans must also satisfy a list of requirements that are in some respects different than those for for-profit borrowers. In addition to the initial requirement that the entity be a 501(c)(3) tax-exempt nonprofit organization or 501(c)(19) tax-exempt veterans' organization, an eligible borrower must meet the following conditions:

  1. has been in continuous operation since January 1, 2015;
  2. is not an Ineligible Business;3
  3. either (i) has 15,000 or fewer employees, or (ii) had 2019 annual revenues of $5 billion or less;
  4. has at least 10 employees;
  5. has an endowment of less than $3 billion;
  6. has total non-donation revenues equal to or greater than 60% of expenses for the period from 2017 through 2019;
  7. has a ratio of adjusted 2019 earnings before interest, depreciation, and amortization to unrestricted 2019 operating revenue greater than or equal to 2%;
  8. has a ratio (expressed as a number of days) of (i) liquid assets at the time of loan origination or origination of the upsized tranche to (ii) average daily expenses over the previous year, equal to or greater than 60 days;
  9. at the time of loan origination or origination of the upsized tranche, has a ratio of (i) unrestricted cash and investments to (ii) existing outstanding and undrawn unavailable debt, plus the amount of any loan under the MSLP facility, plus the amount of any CMS Accelerated and Advance Payments, that is greater than 55%;
  10. is created or organized in the United States or under the laws of the United States with significant operations in and a majority of its employees based in the United States;
  11. does not also participate in any other MSLP facility, the Primary Market Corporate Credit Facility, or the Municipal Liquidity Facility; and
  12. has not received specific support pursuant to Subtitle A of Title IV of the CARES Act.

Loans or upsized tranches extended under these two facilities also will have terms that match those of the New Loan Facility and Expanded Loan Facility, respectively, except that (i) any such new loan must be originated after June 15, 2020, and the outstanding loan relating to any such upsized tranche must have been originated on or before June 15, 2020, as opposed to the New Loan Facility and Expanded Loan Facilities' cutoffs of April 24, 2020, and (ii) the maximum loan size is the lesser of (x) $35 million for new loans and $300 million for upsized tranches or (y) the borrower's average 2019 quarterly revenue, as opposed to a leverage ratio test used for the New Loan Facility and Expanded Loan Facility.

Footnotes

1. The Federal Reserve press release announcing the modifications to the Main Street Lending Program granting greater access to nonprofit organizations can be found here. We previously discussed the initial terms of the MSLP in our memo dated April 14, 2020, which can be accessed here, and the subsequent expansions and revisions thereof in our memos dated May 13, 2020, and June 26, 2020, which can be accessed here and here.

2. The Federal Reserve press release announcing the extension of the Main Street Lending Program purchasing period can be found here.

3. Defined as a type of business listed in 13 CFR 12.1010(b)-(j) and (m)-(s), as modified by regulations implementing the Paycheck Protection Program under the CARES Act.

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