Main Street Lending Program

The Main Street Lending Program (“Program”) was established by the Federal Reserve to support lending to small and medium-sized for profit business and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 pandemic (the “Pandemic”) and now need loans to help maintain operations during the Pandemic. Loans that originate under the Program have various features to help borrowers facing challenges. The Program, which operates through five loan facilities, offers five-year loans with floating rates and deferred principal and interest payments.[1] The Program supports a broad set of employees and offers full-recourse loans ranging from $100,000 to $300,000,000.[2] This memorandum focuses on eligibility requirements and related facilities related to Program loans to for profit businesses.

Eligibility

To be an “Eligible Borrower” under the Program, the for profit business must meet several requirements. First, it must be a United States-formed company that was in existence before March 13, 2020 with significant operations in and a majority of employees based in the United States. The business cannot be an “Ineligible Business” as defined in 13 CFR 120.110(b)-(j) and (m)-(s), as modified by regulations implementing the Paycheck Protection Program established by § 1102 of the Coronavirus Economic Stabilization Act of 2020 (“CARES Act”). The business must either have 15,000 employees or fewer or have 2019 annual revenues of $5 billion or less. Finally, the business must not have received specific support pursuant to pursuant to §4003(b)(1)-(3) of the CARES Act.

If a business meets all eligibility requirements, it is an “Eligible Borrower.” Eligible Borrowers, however, may only participate in one of the Main Street facilities and must be able to make all the certifications and covenants required under the Program. To apply for Program loans, Eligible Borrowers should contact various lenders and confirm status as an Eligible Lender.

For Profit Loan Facilities

The Program operates through three facilities that lend to for profit businesses: (1) the Main Street New Loan Facility (“MSNLF”), (2) the Main Street Priority Loan Facility (“MSPLF”), and (3) the Main Street Expanded Loan Facility (“MSELF”). All three facilities under the same “Eligible Lender” and Eligible Borrower criteria, and have many of the same features, including the same five-year maturity, LIBOR + 3% interest rate, deferral of principal for two years, deferral of interest for one year and the ability of the borrower to prepay without penalty. Other features of the three facilities, however, differ.

Main Street New Loan Facility

The MSNLF allows for five-year term loans ranging from $100,000 to $35,000,000 to be made to Eligible Borrowers. The maximum size of the loan cannot, when added to the Eligible Borrower’s outstanding and undrawn available debt, exceed four times the Eligible Borrower’s adjusted 2019 EBITDA. The loans cannot be, at any time, contractually subordinated in terms of priority to any of the Eligible Borrower’s other loans or debt instruments.[3]

Main Street Priority Loan Facility

The MSPLF permits five-year term loans ranging from $100,000 to $50,000,000 to be made to Eligible Borrowers. The maximum size of the loan cannot, when added to the Eligible Borrower’s outstanding and undrawn available debt, exceed six times the Eligible Borrowers’ adjusted 2019 EBITDA. At all times, the MSPLF loan must be senior to or pari passu with, in terms of priority and security, the Eligible Borrower’s other loans or debt instruments, other than mortgage debt. Eligible Borrowers may, at the time of origination of the loan, refinance existing debt owed by the Eligible Borrower to a lender that is not the Eligible Lender.[4]

Main Street Expanded Loan Facility

Under the MSELF, Eligible Lenders are permitted to increase an Eligible Borrower’s existing term loan or revolving credit facility. The increase tranche is a five-year term loan ranging in size from $10,000,000 to $300,000,000. The maximum size of a loan made in connection with the MSELF cannot, when added to the Eligible Borrower’s existing outstanding and undrawn available debt, exceed six times the Eligible Borrower’s adjusted 2019 EBITDA. At the time of upsizing and at all times thereafter, the upsized tranche must be senior to or pari passu with, in terms of priority and security, the Eligible Borrower’s other loans or debt instruments, other than mortgage debt.[5]