Our note summarises the key elements of the Bank of England's response to the COVID-19 crisis for corporates: the Covid Corporate Financing Facility ("CCFF"). The CCFF offers rapid liquidity to businesses by purchasing commercial paper of up to one-year maturity issued by firms making a “material contribution” to the UK economy.
The CCFF is designed to provide short-term financial assistance to a wide range of firms that were on a stable financial footing prior to COVID-19. This assistance is designed to help those businesses to pay wages and suppliers, among other matters, while they are experiencing severe disruption to cashflows.
The CCFF is available to:
- all non-financial businesses;
- making a material contribution to the UK economy; and
- being in sound financial health before the COVID-19 crisis, meaning a short or long-term investment grade rating by S&P, Moody’s, Fitch or DBRS Morningstar as at 1 March 2020. Unrated businesses will need to acquire a rating and the Bank will look at a range of features in order to form a view.
- foreign-incorporated parents with a genuine business in the UK, companies with significant employment in the UK, and firms with their headquarters in the UK are likely to be eligible provided they satisfy the requirements above.
- non-bank financial companies will in principle be eligible, subject to the Bank being satisfied that the issuer makes a material contribution to corporate financing in the UK and were of sound financial health before the COVID-19 crisis.
- 1 March 2020 ratings - Prima facie eligible businesses which are downgraded after 1 March 2020 will remain eligible for the facility.
The following companies are not eligible:
- leveraged investment vehicles, banks, building societies, insurance companies, other financial sector entities regulated by the Bank or the FCA, or companies within groups that are predominantly banks, investment banks or building societies.
Which securities are eligible?
The Bank will purchase securities from eligible issuers provided that they comply with the following characteristics:
- Sterling denominated;
- maturity of one week to 12 months;
- where available, with a minimum short-term credit rating of A-3 / P-3 / F-3 / R-3 from at least one of Standard & Poor’s, Moody’s, Fitch or Morningstar DBRS as at 1 March 2020, if not available firms can use long term ratings of BBB-/Baa3/BBB- to demonstrate “sound financial health”. Firms without credit ratings have been advised to contact credit rating agencies to seek an assessment of credit quality;
- issued directly into Euroclear and/or Clearstream;
- issued on a discounted basis, meaning no monthly interest payments;
- at a minimum individual size of £1 million with larger offers rounded to the closest £0.1 million;
- no unusual features such as extendibility or subordination. Businesses with existing security over their assets will need to consider arrangements for sharing the security or for the CP programme to accede as a secured creditor.
How long will the CCFF operate?
The CCFF will operate for a minimum of 12 months and for as long as steps are needed to relieve cash flow pressures on eligible issuers. The Bank will give 6 months’ notice before withdrawing the facility.
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