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The Federal Reserve Bank of Boston (the “Boston FRB”), which will oversee the administration of the Federal Reserve’s Main Street Lending Program (the “Program”), has released updates to the Federal Reserve’s Frequently Asked Questions with respect to the Program (the “FAQs”) previously released on April 30, 2020, as well as instructions for borrowers and lenders and copies of the documents which will establish the legal structure of the Program and the Program’s three facilities, the Main Street New Loan Facility (“MSNLF”), the Main Street Expanded Loan Facility (“MSELF”) and the Main Street Priority Loan Facility (“MSPLF”). Links to the updated FAQs, the Program instructions and the various legal documents can be found here.
Among the form documents published by the Boston FRB are (i) the forms of Loan Participation Agreement, Servicing Agreement and other related documents which, together, effectuate purchases of participations in loans made under the Program by the special purpose vehicle established by the Boston FRB for such purpose (the “SPV”), (ii) the forms of certifications and covenants which lenders and borrowers must make to the Boston FRB and the SPV in connection with each loan originated under the Program and (iii) the forms of certification and ancillary items that each lender must submit to the Boston FRB and the SPV in order to register to make loans under the Program. While lenders may use their own forms of loan agreements to govern loans made under the Program, new appendices to the updated FAQs provide a checklist of elements that must be incorporated into a loan agreement to meet the Program’s requirements, as well as model language for many of the required provisions.
The Federal Reserve has not changed the term sheets for the MSNLF, the MSELF, or the MSPLF since they were last published on April 30, 2020.1 However, the updated FAQs do provide greater detail on certain of the terms set forth in the term sheets and proposed legal documents. Such detail includes, among other things, updated guidance on certain aspects of borrower eligibility, including the application of the SBA affiliation rules for purposes of determining borrower eligibility and maximum loan size, clarifications regarding collateral requirements for the various Program facilities and the intercreditor relationships between Program loans and existing borrower debt, and additional guidance on items such as existing debt prepayment restrictions, required borrower and lender certifications and lender voting issues arising from the form participation documents.
An official start date for the Program has not yet been announced. However, in recent interviews, Boston FRB President Eric Rosengren has indicated that he expects Program loan proceeds to be available to eligible companies within the next two weeks.
Locke Lord team members will publish further guidance and analysis regarding the Program on our COVID-19 Resource Center.
Your regular Locke Lord contacts and the authors of this article would be happy to help you navigate the CARES Act and associated guidance as they relate to or otherwise affect small and mid-sized businesses and their lenders.
Organizations that plan for their recovery and are rebuilding for the future will be better positioned for a post-pandemic world. Please visit our Adapt. Adjust. Advance. Resource Center often for up-to-date information on navigating these and other important legal considerations in the postpandemic reality.
1. The Federal Reserve’s April 30 term sheets were previously discussed in a Locke Lord QuickStudy, available at this link.