New TALF Program

Original TALF Program

Aggregate amount

Up to $100 billion

Up to $200 billion

Asset classes

Auto loans and leases

Student loans

Credit card receivables (both consumer and corporate)

Equipment loans and leases

Floorplan loans

Insurance premium finance loans

Certain small business loans that are guaranteed by the Small Business Administration

Leveraged loans (static CLOs only, no commercial real estate CLOs)

Commercial mortgages (only if issued before March 23, 2020, no single asset CMBS, and credit exposures must be located in the US)

“Feasibility of adding other asset classes … will be considered in the future”

Auto loans and leases

Student loans

Credit card receivables (both consumer and corporate)

Equipment loans and leases

Floorplan loans

Insurance premium finance loans

Certain small business loans that were guaranteed by the Small Business Administration

Eligible servicing advance receivables

Commercial mortgages

Ratings requirements

Highest long-term or (other than CMBS) short-term rating from at least two “eligible” rating agencies, with eligible rating agencies not yet specified

Highest long-term or (other than CMBS) short-term rating from at least two eligible rating agencies, which were limited to Moody’s, Standard & Poors, Fitch, and DBRS (and Realpoint for CMBS)

New issue or legacy ABS

New issue only (only for ABS issued on after March 23, 2020), other than legacy CMBS (not eligible if issued on or after March 23, 2020)

New issue only, other than legacy CMBS

Age of receivables

Time limits with respect to origination of receivables not yet specified, but “all or substantially all” of the receivables must be “new issue,” other than for legacy CMBS

Each eligible asset class had detailed time limits with respect to origination of receivables, with accommodations made for revolving master trusts

Eligible borrowers

Each of the following that maintains an account relationship with a primary dealer:

A business entity created or organized in the US or under the laws of the US and that has significant operations and a majority of its employees based in the US

Each of the following that maintains an account relationship with a primary dealer:

A business entity organized under the laws of the US or a political subdivision or territory thereof that conducts significant operations or activities in the US (including such an entity that has a non-US parent company)

A US branch or agency of a foreign bank

An investment fund that is US-organized, and managed by an investment manager that has its principal place of business in the US

Prohibition on borrower-affiliated ABS

Not announced

ABS not permitted to be backed by loans originated or securitized by borrower or an affiliate of the borrower

Loan term

Three years

Three years generally, five years for CMBS and certain SBA loans

Loan amount

Not announced

Minimum $10 million, no maximum

Haircuts on market value of ABS collateral

Schedule of specific haircuts that vary by asset class and expected life of the ABS:

Auto, prime retail lease: 10% to 14%

Auto, prime retail loan: 6% to 10%

Auto, subprime retail loan: 9% to 13%

Auto, motorcycle and other RVs: 7% to 11%

Auto, commercial and government fleet: 9% to 13%

Auto, rental fleet: 12% to 16%

Credit card, prime: 5% to 8%

Credit card, subprime: 6% to 10%

Equipment, loan and lease: 5% to 9%

Floorplan, auto: 12% to 16%

Floorplan, non-auto: 11% to 15%

Premium finance, property and casualty: 5% to 8%

SBA loans: 5% to 6%

Student loans, private: 8% to 14%

Student loans, government guaranteed: 5% to 6%

Leverage loans, static CLOS: 20% to 22%

Commercial mortgages, legacy CMBS: 15%

Auto, credit card, equipment, floorplan, and premium finance cannot exceed 5-year average life

For all other ABS with average lives of more than 5 years, haircuts increase 1% for each additional year (or portion thereof), but average life cannot exceed 5 years

Schedule of specific haircuts that varied by asset class and expected life of the ABS:

Auto, prime retail lease: 10% to 14%

Auto, prime retail loan: 6% to 10%

Auto, subprime retail loan: 9-13%

Auto, motorcycle and RVs: 7-11%

Auto, commercial and government fleet: 9% to 13%

Auto, rental fleet: 12% to 16%

Credit card, prime: 5% to 8%

Credit card, subprime: 6% to 10%

Equipment, loan and lease: 5% to 9%

Floorplan, auto: 12% to 16%

Floorplan, non-auto: 11% to 15%

Premium finance, property and casualty: 5% to 8%

Servicing advances, residential mortgages: 12% to 16%

SBA loans: 5% to 6%

Student loans, private: 8% to 14%

Student loans, government guaranteed: 5% to 6%

Commercial mortgages, new-issue CMBS: 15%

Commercial mortgages, legacy CMBS: 15% (based on lesser of dollar purchaser price on trade date or market price on subscription date)

For ABS benefitting from a substantial government guarantee, with average lives of more than 5 years, haircuts increased 1% for every two additional years (or portion thereof)

For all other ABS with average lives of more than 5 years, haircuts increased by 1% for each additional year (or portion thereof)

Recourse to borrower

No, exceptions not announced

Generally, no, but could become recourse if:

Borrower failed to be eligible

Collateral eligibility representation was inaccurate

Certain other representations were breached

Borrower failed to properly surrender collateral to custodian at or before maturity

Pricing

Floating or floating specified for specific asset classes

Fixed rate, generally, for ABS without government guarantee: 125 basis points over two-year OIS rate for average life less than two years, 125 basis points over three-year OIS rate for average life two years or more

Floating rate, SBA Pool Certificates: 75 basis points over top of federal funds target range

Fixed rate, SBA Development Company Participation Certificates: 75 basis points over three-year OIS rate

Floating rate, CLOs: 150 basis points over 30-day average SOFR

Other pricing terms to be announced

Choice of fixed or floating

Floating rate, generally, for ABS without government guarantee: 100 basis points over one-month LIBOR

Floating rate, federally guaranteed student loans: 50 basis points over one-month LIBOR

Floating rate, private student loans with prime-based coupon: higher of 1% and prime rate minus 175 basis points

Floating Rate, SBA Pool Certificates: 75 basis points over federal funds target rate

Fixed rate three-year loans, generally: 100 basis points over one-year LIBOR swap rate for average life less than one year, 100 basis points over two-year LIBOR swap rate for average life more than one but less than two years, 100 basis points over three-year LIBOR swap rate for average life two years or more

Fixed Rate, SBA Development Company Participation Certificates: 50 basis points over three-year LIBOR swap rate for three-year loans, 50 basis points over five-year LIBOR swap rate for five year loans

Fixed rate, CMBS: 100 basis points over three-year LIBOR swap rate for three-year loans, 100 basis points over five-year LIBOR swap rate for five-year loans

Administrative fee

10 basis points on loan amount

5 basis points on loan amount

Offering type

Not announced

Registered public ABS and Rule 144A ABS trading book-entry on DTC

Prepayment permitted

Yes

Yes

Collateral substitution permitted

No, even for CLOs (which must be static)

No

Resecuritizations permitted

No

No

Synthetic ABS permitted

No

No

Additional corporate restrictions:

Section 4019 of the CARES Act, which restricts lending to any business that is directly or indirectly owned by the president, senior executive branch officials, or members of Congress (or certain of their immediate family members)

Fed has stated that TALF will not impose any requirements on borrowers with respect to employee compensation, distribution of dividends, or any other corporate decision[3]

As announced, would have imposed executive compensation limits, but these were removed before implementation

Borrowing procedures

Not announced

Borrowing procedures included:

Specified certifications in the offering documents, including that the ABS are eligible collateral

Accountants’ attestation that the sponsor’s assertion that the ABS are “eligible collateral” is fairly stated in all material respects

Limited pricing and settlement dates