On April 30, 2020, the Federal Reserve Board announced expansions to the scope and eligibility of the Main Street Lending Program following the solicitation of public comments. The Main Street Lending Program, originally announced on April 9, 2020, provides for the purchase by the Federal Reserve of up to $600 billion in loans to small and mid-sized businesses that are originated by eligible financial institutions. The Main Street Lending Program will now consist of three separate purchase facilities:
- the Main Street New Loan Facility (the “New Facility”), through which eligible lenders may originate new secured or unsecured term loans of up to $25 million to eligible businesses and subject to a 4.0x leverage ratio cap;
- the Main Street Priority Loan Facility (the “Priority Facility”), through which eligible lenders may originate new secured or unsecured term loans of up to $25 million to eligible businesses with greater leverage and subject to a 6.0x leverage ratio cap; and
- the Main Street Expanded Loan Facility (the “Expanded Facility”), through which eligible lenders may provide increases of up to $200 million under existing secured or unsecured term or revolving loan facilities to eligible businesses and subject to a 6.0x leverage ratio cap and a 35% debt capitalization cap.
Key terms and conditions of the New Facility, the Priority Facility and the Expanded Facility are summarized in this alert – these remain subject to further guidance and modifications by the Federal Reserve Board and the Secretary of the Treasury. Notably, in addition to now offering two different options for new loans, the maximum size of the facilities has been increased (from $20 to $25 million and $150 to $200 million, respectively), interest is now LIBOR plus 300 basis points (vs. SOFR plus 250-400 basis points) and amortization requirements have been specified. In addition, key questions with respect to EBITDA calculations and borrower and lender eligibility criteria have also been addressed. Eligible borrowers will now include businesses with up to 15,000 employees (vs. 10,000) or $5 billion of revenue (vs. $2.5 billion), though in each case these thresholds will be calculated subject to certain affiliation rules as discussed in further detail in this alert.