On June 8, the Federal Reserve once again released new term sheets for its Main Street Lending Program, further expanding access for a wider spectrum of borrowers and increasing the program’s flexibility. This is the second expansion of the program, with the first occurring on April 30, just three weeks after the program’s announcement. That previous expansion added the Main Street Priority Loan Facility (MSPLF) to the previously announced Main Street New Loan Facility (MSNLF) and Main Street Expanded Loan Facility (MSELF). On May 27, the Federal Reserve issued additional guidance in the form of an expanded set of Frequently Asked Questions and new forms and documentation.
The new term sheets released on June 8 increase the maturity for eligible loans for all three facilities from four years to five years. Additionally, they allow for principal payment deferral of two years instead of one year and push back principal amortization. Principal amortization is now uniform across all three facilities: 15% at the end of the third year, 15% at the end of the fourth year and a balloon payment of 70% at the end of the fifth year.
The new MSNLF term sheet reduces the minimum loan size from $500,000 to $250,000 and raises one of two possible maximum loan size determiners from $25 million to $35 million.
The new MSELF term sheet keeps the minimum loan size at $10 million but raises the maximum loan size to the lesser of $300 million (up from $200 million) or an amount that, when added to the eligible borrower’s existing outstanding and undrawn available debt, does not exceed six times the borrower’s adjusted 2019 earnings before interest, taxes, depreciation and amortization. A third possible way to determine maximum loan size (based only on existing outstanding and undrawn available debt) has been eliminated.
The new MSPLF term sheet reduces the minimum loan size from $500,000 to $250,000 and raises one of two possible maximum loan size determiners from $25 million to $50 million. Additionally, the MSPLF has been brought into alignment with the two other facilities by raising the Reserve Bank’s participation from 85% to 95%.
Manatt has previously provided analysis of the announcement of the Main Street Lending Program, its initial expansion and the additional guidance provided on May 27, and we will continue to monitor that program as well as other COVID-19 relief programs. Our COVID-19 resources are available here.