Federal Reserve Releases Details on Main Street New Loan Facility
The Federal Reserve released details on the Main Street New Loan Facility (the “Facility”) today. The Facility is intended to facilitate lending to small and medium-sized businesses that are not eligible for the SBA Paycheck Protection Program.
Eligible Borrowers: Businesses with up to 10,000 employees or $2.5 billion in 2019 annual revenues that are U.S. based or have significant operations and the majority of its employees in the U.S.
Eligible Lenders: Eligible Lenders are U.S. insured depository institutions, U.S. bank holding companies, and U.S. savings and loan holding companies.
Certifications: Borrower must attest, among other things, that, beginning on the date of origination of the loan and until 12 months following the date on which the loan is not outstanding, it will:
-
Not repurchase an equity security listed on the national securities exchange of the business or its parent, except to the extent required under a contractual obligation in place prior to March 27, 2020;
-
Not pay dividends or make other capital distributions with respect to common stock; and
-
Not increase the total compensation of officers and employees who had a total compensation of over $425,000 in 2019. For officers and employees that who had a total compensation of over $3 million in 2019, their total compensation is capped at the sum of (i) $3 million and (b) 50% of the excess over $3 million of the total compensation received by the officer or employee in 2019. Total compensation includes salary, bonuses, awards of stock, and other financial benefits.
Loan Features:
-
Maturity: 4 years
-
Deferral: Amortization of principal and interest deferred for one year
-
Rate: Adjustable rate of SOFR + 250-400 basis points
-
Minimum loan size: $1 million
-
Maximum loan size: The lesser of (i) $25 million or (ii) an amount that, when added to the Eligible Borrower’s existing outstanding and committed but undrawn debt, does not exceed 4x EBITDA.
-
Prepayment: Allowed without penalty
-
Use of Proceeds: Cannot be used to repay other loan balances
Participations: A Federal Reserve Bank will purchase 95% participations in eligible loans from eligible lenders. Lenders will retain 5% of each eligible loan.
The full release is here.
