These differ from the PPP in how they interact with the borrower’s existing outstanding debt, including the level of pre-crisis indebtedness the borrower may have incurred and in the fact that they are full-recourse and are not forgivable.
For property owners that may have tenants that are having difficulty making rent payments, these facilities may provide significant financial support for property management, maintenance and mortgage payments until economic conditions improve. Loan sizes range from $500,000 up to $200 million and for loan amounts of at least $1 million, interest payments can be deferred for up to a year. And while these loans are not allowed to be subordinated to other outstanding loans or debt instruments, mortgage debt does not factor into these limitations.
An added benefit to this program is that businesses are able to receive loan proceeds from both the PPP and the Main Street Lending Program. Similar to the PPP, funds are only disbursed through eligible banks. Upon funding, banks will retain a 5% share of the loan and sell the remaining 95% to a facility to be set up by the Federal Reserve.
To be eligible, a business organization must: (i) have 15,000 or less employees or a maximum of $5 billion in annual revenues for 2019, (ii) have been established prior to March 13, 2020, and (iii) meet the following conditions:
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It is a U.S. entity with significant operations in and a majority of its employees based in the U.S.
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It was in good financial condition prior to the crisis
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It is not also a participant in the Primary Market Corporate Credit Facility
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It may only participate in one of the Main Street programs (MSNLF, MSPLF, or MSELF)
While a quick summary of each program has been provided below, a more detailed FAQ document provided by the Federal Reserve and can be found here: https://www.federalreserve.gov/monetarypolicy/files/main-street-lending-faqs.pdf
MAIN STREET NEW LOAN FACILITY (MSNLF):
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Intended for new loans originated on or after April 24, 2020
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Loans range in size from $500,000 to $25 million, and
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The maximum size of a loan made in connection with the MSNLF cannot, when added to the borrower’s existing outstanding and undrawn available debt, exceed four times the borrower’s adjusted 2019 earnings before interest, taxes, depreciation, and amortization (EBITDA).
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The loan must also be senior to other loans or debt instruments
MAIN STREET PRIORITY LOAN FACILITY (MSPLF):
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Intended for new loans originated on or after April 24, 2020.
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Loans range in size from $500,000 to $25 million.
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The maximum size of a loan made in connection with the MSPLF cannot, when added to the borrower’s existing outstanding and undrawn available debt, exceed six times the borrower’s adjusted 2019 EBITDA.
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The loan must also be senior to other loans or debt instruments.
MAIN STREET EXPANDED LOAN FACILITY (MSELF):
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Applies to loans existing before April 24, 2020, that will be “upsized” through the program.
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Loans range in size from $10 million to $200 million.
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The maximum size of a loan made in connection with the MSPLF cannot exceed (i) 35% of the borrower’s existing outstanding and undrawn available debt that is pari passu in priority with the loan and equivalent in secured status (i.e., secured or unsecured); or (ii) when added to the borrower’s existing outstanding and undrawn available debt, six times the borrower’s adjusted 2019 EBITDA.
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The loan must also be senior to other loans or debt instruments.
In addition to your accountant or attorney, our team specializes in assisting property owners with a variety of sale and lease strategies so feel free to give our team a call as we may be able to assist you in this process.
