Thread by @EdGrapeNutZimm

1) "Federal Reserve developed the #MainStreetLending Program to help credit flow to small and medium-sized businesses that were in sound financial condition before the pandemic."

2) after initial announcement of #MainStreetLending Program, Fed Reserve expanded it to: Create a 3rd loan option, w/increased risk sharing by lenders for borrowers with greater leverage &
Lowered the minimum loan size for certain loans to $500,000
federalreserve.gov/newsevents/pre…

3) this resulted in 3 loan (🍕) options: plain, pepperoni & mushroom: "termed new, priority, & expanded" 4 year loans:
New: $500K Minimum Loan Size
Priority: Ditto
Expanded: $10M Minimum Loan Size & up to a TON!

4) the Max under these loans is complex: the lesser of a hard $# "or an amount that, when added to outstanding & undrawn available debt, doesn't exceed __x adjusted 2019 EBITDA"
New: Max = lesser of $25M or 4x 2019 EBITDA
Priority: Max = lesser of $25M or 6x 2019 EBITDA
&

5) Expanded: Max = "lesser of $200M, 35% of existing outstanding & undrawn available debt, or an amount that, when added to outstanding & undrawn available debt, does not exceed 6.0x adjusted 2019 EBITDA"
for all 3, payments deferred for yr 1

6) the govt❤️acronyms. "Main Street Expanded
Loan Facility=MSELF"
On May 15, Federal Reserve: "The Board continues to expect that the MSELF will not result in losses to the Federal Reserve." I too will not blame MSELF!
federalreserve.gov/publications/f…

7) Unlike PPP, lenders retain some risk: Federal Reserve Bank of Boston will commit to lend to a single common special purpose vehicle (SPV) on a recourse basis
The SPV will buy 95% participations in Eligible Loans from
Eligible Lenders. Those Lenders will keep 5% of each Loan.

8) Unlike PPP, #MainStreetLendingProgram: "The availability of additional credit is intended to help companies that were in sound financial condition prior to the onset of the COVID-19 pandemic maintain their operations and payroll until conditions normalize." #MSLP (from FAQs)

9) Also unlike #PPPLoans, #MainStreetLoans "are full-recourse loans and are not forgivable." FAQ 3
federalreserve.gov/monetarypolicy…

10) All 3 #MSLP loan types (#MSNLF, #MSPLF, #MSELF) have "the same maturity, interest rate [LIBOR+3%], deferral of principal & interest for 1 year, & ability of the
borrower to prepay without penalty." FAQ 4

11) lots of folks have asked us - you CAN do both #PPPLoans & #MSLP: FAQ A7: Main Street is for businesses that "were unable to access the #PPP or that require ADDITIONAL financial support AFTER receiving a #PPPloan"

12) Unlike #PPP, #MSNLF borrowers must've been in "sound financial condition prior to the onset of the
COVID-19 pandemic" so existing loans w/ "the Eligible Lender as of 12/31/19 must've had an
internal risk rating (based on the Eligible Lender’s risk rating system)=7 (“pass”)

13) because #MSELF is about #Upsizing, "To be eligible for “upsizing,” the existing term loan or revolving credit facility must have been originated on or before April 24, 2020, & must have a remaining maturity of at least 18 months" FAQ D1

14) that doesn't stop an Eligible Lender from extending maturity of an existing loan to get it to 18 months for purposes of #MSELF eligibility (also FAQ D1) - so you can extend & upsize

15) #ELIGIBILITY requirements for #MSLP are in FAQ E1 & include: 15k or $5B:
The Business must EITHER have (a) 15,000 employees or fewer, or (b) 2019 annual revenues of $5B or less.
YOU MUST "aggregate with the employees & revenues of its AFFILIATED entities"

16) #MSLP is truly for🇺🇸business: "created or organized in the US or under the laws of the US with significant operations in & a majority of their employees based in the US." FAQ E.1(4)

17) Eligible Businesses can participate in EITHER #MSNLF #MSPLF #MSELF or #PMCCF - but only in 1.
&
is INELIGIBLE "if it has received support pursuant to section 4003(b)(1)-(3) of the CARES Act"

18) There are required borrower certifications: I've attached the #MSNLF certifications, available on page 3 here: federalreserve.gov/newsevents/pre…

19) #MSNLF also obligates borrowers to "make commercially reasonable efforts to maintain its payroll & retain its employees during the time the Eligible Loan is
outstanding." Remember - these are 4 year loans!

20) as in PPP, Treasury &, in this case, Federal Reserve are expressly entitling lenders to "rely on an Eligible Borrower’s
certifications & covenants, as well as any subsequent self-reporting by the Eligible Borrower." So we will also have some compliance issues...

21) Just in case it wasn't clear - PPP & Main Street are NOT mutually exclusive: p10 of the FAQ "For the avoidance of doubt, a Business that has received PPP loans, or that has affiliates that have received PPP loans, is permitted to borrow under Main Street,"

22) Affiliation issues will be even more complex under Main Street because these are larger organizations and the revenue cut off / employee headcount limits BOTH require aggregating with ALL AFFILIATES. We're using 301(f), just as with PPP Loans:
federalreserve.gov/monetarypolicy…

23) FAQ E.5) "Business’s employees & 2019 revenues are calculated by aggregating the employees & 2019 revenues of the Business itself with those of the Business’s affiliated entities in accordance with the affiliation test set forth in 13 CFR 121.301(f) (1/1/2019 ed.)

24) FAQ E6&7 recognize that "EBITDA is the key
underwriting metric required for #MSNLF #MSPLF & #MSELF" so #nonprofits are out for now & they're figuring out what to do about "asset-based borrowers"

25) FAQ G explains that for calculating EBITDA, there's an emphasis on past practices by that lender, esp for that borrower.
Calculating outstanding debt has some twists & turns, & is also discussed in FAQ G

26)"'Existing outstanding&undrawn available debt' includes all amounts borrowed under any loan facility, including unsecured or secured loans from any bank, non-bank financial institution,or private lender, as well as any publicly issued bonds or private placement facilities" BUT

27) there are exclusions too, so CFOs will sharpen pencils. Also, the calculation date matters:
"Existing outstanding & undrawn available debt should be calculated as of the date of the loan application."

28) G5 speaks to #amortization & could be clearer. There's definitely no payment during yr 1 across ANY of the 3 loans & then:
#MSNLF=1/3 each @ end of yrs 2,3&4
#MSPLF & #MSELF=15% of principal due @ end of each of years 2&3,& 70%🎈balloon payment at maturity (end of year 4)

29)SECURITY
All 3 loans may be secured or unsecured, but
"An MSELF Upsized Tranche MUST be secured if the underlying loan is secured." If secured, any
collateral securing the underlying loan "must
secure the MSELF Upsized Tranche on a pro rata basis"
open.spotify.com/track/1j1HxIXx…

30) No free 🍔
Unlike PPP, #MSNLF #MSPLF: Eligible Lenders pay a transaction fee of 100 basis points of the principal @ time of origination, & may pass it on to Borrowers & charge AN ADDITIONAL Fee of up to another 100 pt
it's 75 & 75 for #MSELF
FAQ G7

31) "Borrower should undertake good-faith commercially reasonable efforts to maintain payroll & retain employees during the term of the loans?
"in light of its capacities, the economic environment, its available resources, and the business need for labor."
FAQ G8

32) the govt knows some of you have already done layoffs, & they understand:
"Borrowers that've already laid-off/furloughed workers as a result of disruptions from COVID-19 are eligible to apply for #MainStreetloans"

33) While you can only participate in 1 of #MSNLF #MSPLF #MSELF, you can get >1 loan under a single Main Street facility, subject to the cap! FAQ G9

34) some restrictions on comp & stock buybacks & paying down debt. For instance: borrower must "commit to refrain from repaying principal or interest on any debt until #MSNLF or #MSELF #UpsizedTranche is repaid in full, unless the debt or interest payment is
mandatory&due"

35)While #MSNLF #MSELF are outstanding, you can't " seek to cancel/reduce any committed lines of credit with the Eligible Lender or any other lender."
Same for #MSPLF BUT, you CAN- @ loan origination -"refi existing debt owed to a lender that is NOT the Eligible Lender"
#FAQH3

36) that shouldn't stop you from drawing/paying down line of credit in ordinary course or getting/using equipment/inventory financing "provided that such debt is secured by newly acquired property..." & is junior or pari passu to the MS loans
& you can refi maturing debt

37) & when @federalreserve says “Upsize” the Tranche, am I the only 1 who thinks of rapper’s delight by #SugarhillGang “up jump the boogie to the rhythm of the...”? open.spotify.com/track/0FWhGmPV…

37) #FOIA: @federalreserve will disclose for #MSNLF #MSPLF #MSELF: names of lenders & BORROWERS, amounts borrowed & interest rates charged, & overall costs, revenues & other fees
"names & identifying details of each participant in the facilities #FAQL2