CARES Act Main Street Lending Program: Loan Parameters, Borrower and Lender Eligibility, Post-Closing Restrictions

Recording of a 90-minute premium CLE webinar with Q&A


Conducted on Tuesday, May 19, 2020

Recorded event now available

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Program Materials

This CLE webinar will analyze the lending parameters and structural features of the Main Street Lending Program established under the CARES Act. The panel discussion will include loan terms, borrower and lender eligibility, and stock buyback and executive comp restrictions placed on participating borrowers, as well as practical considerations.

Description

On Apr. 9, 2020, the U.S. Treasury announced that it would use funds appropriated under the CARES Act to provide up to $600 billion in new financing to small and medium-sized businesses. The Main Street New Loan Facility will provide new loan facilities to eligible borrowers. The Main Street Expanded Loan Facility will provide eligible borrowers and qualified lenders with financing to increase existing loan facilities by upsizing bank term loan debt.

The Federal Reserve will lend $75 billion to a single purpose vehicle (SPV) on a recourse basis. The SPV will purchase 95% participation of eligible loans from qualified lenders (with these lenders retaining 5% of the loans), with a limit of $600 billion in purchased loans. The SPV will share risk on the funds advanced with the eligible lender on a proportionate basis. Loans under these programs will be available until Sept. 30, 2020, or until the funds are expended.

Borrowers must have a thorough understanding of the required loan terms, attestations, and eligibility requirements for each loan program. Participating borrowers must be U.S. companies with no more than 15,000 employees and no more than $5 billion in 2019 annual revenues. Subject to further guidance, borrowers will be subject to limitations on stock buybacks, and restrictions on dividends and distributions and executive compensation and severance that will extend until one year after the loan is repaid.

Each eligible lender must attest that the proceeds of an eligible loan will not be used to repay or refinance preexisting loans or lines of credit made by the lender, that it will not cancel or reduce any existing lines of credit outstanding to an eligible borrower. Each borrower and lender must certify that its participation will not violate the conflicts of interest prohibition in section 4019(b) of the CARES Act.

Listen as our authoritative panel discusses the loan parameters, eligibility requirements, structuring, and other nuances of the Main Street Lending Program.

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Outline

  1. Components of the Main Street Lending Program
    1. Main Street New Loan Facility
    2. Main Street Expanded Loan Facility
  2. Eligible lenders and lender attestations
  3. Borrower eligibility
  4. Required borrower attestations
  5. Restrictions
  6. Practical considerations

Benefits

The panel will review these and other key issues:

  • What are the differences in deal terms between the Main Street New Loan Facility and the Main Street Expanded Loan Facility?
  • How does the SPV fund its participation in Main Street Loans?
  • How are lenders restricted in their use of funds under the new program?
  • What are the eligibility requirements for borrowers? Can they participate in other CARES Act programs?

Faculty

Class, Jamie
Jamie N. Class

Partner
Foley & Lardner

Ms. Class is a partner and business lawyer with Foley & Lardner LLP. She advises clients in structuring,...  |  Read More

Furlong, Heidi
Heidi M. Furlong

Partner
Foley & Lardner

Ms. Furlong focuses her practice on the representation of financial institutions and borrowers in sophisticated...  |  Read More

Lauria-Banta, Justin
Justin D. Lauria-Banta

Attorney
Foley & Lardner

Mr. Lauria-Banta is an associate with Foley & Lardner LLP and a member of the firm’s Business Law...  |  Read More

Vu, Hoang
Hoang Quan Vu

Partner
Foley & Lardner

Mr. Vu has represented lenders, borrowers, issuers, sponsors, purchasers, and public and private companies in corporate...  |  Read More

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