End of the Road: Federal Reserve Issues Guidance for Winding Down Main Street Lending Program

The Main Street Lending Program (MSLP) is scheduled to terminate on Dec. 31, 2020. The Federal Reserve recently issued additional guidance in anticipation of winding down the program.

McGuireWoods’ previous client alerts (from May 1, May 29, June 12, June 18, July 6, July 17, July 31, Sept. 22 and Nov. 12) summarize the term sheets, guidance and form documents issued and revised by the Federal Reserve for the MSLP. As noted in those previous client alerts, the Federal Reserve established the MSLP to support lending to small and medium-sized businesses and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 pandemic. Under the MSLP, the Federal Reserve Bank of Boston (FRB Boston) formed MS Facilities LLC as a special purpose vehicle (Main Street SPV) to purchase up to $600 billion of participations in eligible loans. The MSLP currently consists of five facilities: the Main Street New Loan Facility, the Main Street Priority Loan Facility, the Main Street Expanded Loan Facility, the Nonprofit Organization New Loan Facility and the Nonprofit Organization Expanded Loan Facility.

On Nov. 25, 2020, FRB Boston released updated guidance in anticipation of the MSLP’s scheduled Dec. 31, 2020, termination date:

  1. Lenders should register by Dec. 4. Lenders not yet registered with the MSLP should initiate registration on or before Dec. 4, 2020. Any new lender registration initiated after that date likely will not be completed in time to sell a loan participation to the Main Street SPV before the MSLP’s scheduled termination date.
  2. Lenders should submit eligible loans by Dec. 14. Lenders should submit eligible loans to the Main Street SPV (including all required documentation and fields in the Main Street Portal) on or before Dec. 14, 2020. The Federal Reserve will make efforts to process the loans submitted to the Main Street SPV by that date in order to effect the purchase of participation interests in advance of the MSLP’s scheduled termination date. The Federal Reserve has indicated that it is unlikely that any loan submitted after Dec. 14, 2020, will be processed in time for purchase by the Main Street SPV.
  3. No commitment letters will be issued after Dec. 23. The Main Street SPV will cease issuing commitment letters under the condition-of-funding model as of Dec. 23, 2020. No loans submitted under the condition-of-funding model can be purchased by the Main Street SPV unless a commitment letter is issued on or before Dec. 23, 2020.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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