The Federal Reserve Board’s (Federal Reserve) open comment period on its proposed Main Street Lending Program (MSLP) ended on April 16, 2020. Hundreds of comments raising concerns and recommendations about the MSLP were submitted by companies, lenders, and industry groups, as well as by members of Congress. A number of the key concerns, which have been echoed by other commenters, were summarized by the US Chamber of Commerce (Chamber) in its comment letter to the Federal Reserve and the US Department of the Treasury. These recommendations include:
- Increasing the loan term beyond four years.
- Decreasing the minimum loan size.
- Modifying employee and revenue thresholds.
- Including US branches or affiliates of non-US institutions as Eligible Lenders.
- Clarifying the reasonable efforts an eligible borrower must take to maintain its payroll and retain its employees.
- Adjusting the current definition of EBITDA based on GAAP.
- Easing restrictions that prohibit eligible borrowers from paying dividends to shareholders or engaging in stock repurchases.
- Reconsidering the use of the secured overnight financing rate (SOFR) at the onset of the loan.
- Expanding eligible loans under the Main Street Expanded Lending Facility beyond those anchored on preexisting term loans.
- Clarifying the material terms of the participation agreement for the Special Purpose Vehicle.
The Chamber’s comment letter can be found here.
The Federal Reserve is currently evaluating the comments provided and working to create the MSLP’s infrastructure. Revised term sheets for the MSLP may be issued as early as this week, although it may take a few weeks for the operational details of the MSLP to become final. From time to time, the Federal Reserve will post additional information about the MSLP here. Jones Walker will post updates on the final terms of the MSLP and the Federal Reserve’s guidance on the application processes on its COVID-19 Center webpage.
Also on April 16, 2020, the Federal Reserve submitted two reports to Congress pursuant to Section 13(3) of the Federal Reserve Act summarizing the two Main Street Loan Program Facilities: the Main Street New Lending Facility and the Main Street Expanded Lending Facility. The reports summarize the MSNLF Term Sheet and the MSELF Term Sheet issued by the Federal Reserve on April 9, 2020. Jones Walker’s summary of the details of the MSLP term sheets can be found here.