Federal Reserve Further Expands Main Street Lending Program And Opens Lender Registration

I. Background

On June 8, 2020, the Federal Reserve Board announced that it was taking additional actions to expand the scope of, and access to, the Main Street Lending Program ("MSLP").¹ On the same day, the Federal Reserve also released a series of revised frequently asked questions ("FAQs") to help answer additional questions lenders and borrowers may have about the MSLP.²

On June 15, 2020, the Federal Reserve Board opened the MSLP for lender registration, which can be accessed here. To establish their eligibility, lenders must first register with the MSLP. Eligible Lenders include:

• US federally insured depository institutions, including banks, savings associations, and credit unions;
• US branches or agencies of foreign banks;
• US bank holding companies;
• US savings and loan holding companies;
• US intermediate holding companies of foreign banking organizations; and
• US subsidiaries of any of these.

II. Main Street Lending Program

The MSLP consists of three loan facility options: the Main Street New Loan Facility ("New Loan Facility"), the Main Street Priority Loan Facility ("Priority Loan Facility") and the Main Street Expanded Loan Facility ("Expanded Loan Facility").

Some of the key revisions to the MSLP from the previous terms announced are:

• New Loan Facility:
  • The Federal Reserve expanded the scope of this facility by lowering the minimum loan size to $250,000 from the previous minimum of $500,000.
  • The Federal Reserve extended the term of loans under this option from four years to five years.
  • The Federal Reserve modified the repayment terms for this loan option by delaying principal payments for two years, rather than one year, and requiring repayments in years 3, 4 and 5 of 15%, 15% and 70%, respectively. Previously, loans under this option required repayments of 33.33% in each of years 2-4.
  • The Federal Reserve increased the maximum loan size of this loan option to $35 million from $25 million.
  • The Federal Reserve's revised Term Sheet relating to the updated New Loan Facility is attached as Annex A to this memorandum.
• Priority Loan Facility:
  • The Federal Reserve expanded the scope of this facility by lowering the minimum loan size to $250,000 from the previous minimum of $500,000.
  • The Federal Reserve extended the term of loans under this option from four years to five years.
  • The Federal Reserve modified the repayment terms for this loan option by delaying principal payments for two years, rather than one year, and requiring repayments in years 3, 4 and 5 of 15%, 15% and 70%, respectively.
  • The Federal Reserve increased the maximum loan size of this loan option to $50 million from $25 million.
  • The Federal Reserve raised the Reserve Bank's participation to 95% for this loan option from 85%. Lenders would retain a 5% participation in the loans, similar to the New Loan Facility and Expanded Loan Facility.
  • The Federal Reserve's Term Sheet relating to the updated Priority Loan Facility is attached as Annex B to this memorandum.
• Expanded Loan Facility:
  • The Federal Reserve extended the term of loans under this option from four years to five years.
  • The Federal Reserve modified the repayment terms for this loan option by delaying principal payments for two years, rather than one year, and requiring repayments in years 3, 4 and 5 of 15%, 15% and 70%, respectively.
  • The Federal Reserve increased the maximum loan size of this loan option to $300 million from $200 million.
  • The Federal Reserve's Term Sheet relating to the updated Expanded Loan Facility is attached as Annex C to this memorandum.

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Footnotes

1. The Federal Reserve press release announcing the further expansion of the scope of and eligibility under the Main Street Lending Program 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 expansion and revision thereof in our memo dated May 13, 2020, which can be accessed here.

2. The full Federal Reserve FAQs regarding the Main Street Lending Program can be found here. We previously discussed the initial FAQs in our May 13, 2020 memo, which can be accessed using the link above.

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