Main Street Lending Program: Documentation, Federal Reserve Participation, Concerns With Existing Financing

Description

On July 6, 2020, the Federal Reserve Bank of Boston announced it is now fully operational and ready to purchase participations in eligible loans submitted under any of the Main Street Loan programs. The Fed previously released term sheets and various other program documents for the "New," "Priority," and "Expanded" Main Street Loan facilities along with FAQs, which provide a roadmap for documenting and closing Main Street loans.

The Fed has provided model language for certain essential provisions in loan documents (as well as a list of required financial information borrowers are required to deliver on an ongoing basis). Also, borrowers and lenders must make various certifications in connection with each loan.

Counsel should understand the relationship between the borrower, the lender, and the Fed-owned SPV, which will be purchasing 95 percent participations in Main Street loans. The participation agreement, the assignment-in-blank, and the co-lender agreement must be read together with the loan documents, along with the servicing agreement, which sets forth the lender's and the SPV's rights in connection with the administration of the loan.

Any borrower seeking to take advantage of the facilities under the Program will need to assess how a Main Street loan will integrate with existing debt structures. Contractual issues related to everything from restrictions on additional debt and liens to prohibitions on distributions should be analyzed carefully.

Listen as our authoritative panel analyzes the essential documentation and features of the Main Street Lending Program. The panel will also discuss the certifications required from the borrower, the terms of the participation arrangement between the lender and SPV, and concerns relating to existing financing.