Highlight of Changes Made to Main Street Lending Program

Clayton Stallbaumer and Staci Rosche of McGuireWoods summarized the changes to the MSLP, which were announced on Monday.

1.       New Five-Year Maturity for all MSLP Loans: All MSLP term loans will be term loans with a five-year maturity. Previously, the maturity for MSLP loans was four years.

2.       Principal Deferral of TWO Years for all MSLP Loans: Principal payments for MSLP loans will be deferred for two years. Previously, principal payments were to be deferred for one year. Interest payments remain subject to a one-year deferral.

3.       Amortization the same for all MSLP loans: Principal amortization is now the same across all three facilities: 15% at the end of year 3, 15% at the end of year 4, and 70% at maturity (at the end of year 5). Previously, the MSNLF had an amortization schedule different from the other two MSLP facilities.

4.       Minimum Loan Sizes Reduced for MSNLF & MSPLF, but NOT for MSELF: Minimum loan sizes for the MSNLF and the MSPLF have been reduced from $500,000 to $250,000. The minimum loan size for the MSELF remains $10 million.

5.       Maximum loan sizes increased: Maximum loan sizes have increased:

a.       MSNLF: Lesser of $35 million (previously $25 million) and 4x adjusted 2019 EBITDA

b.       MSPLF: Lesser of $50 million (previously $25 million) and 6x adjusted 2019 EBITDA

c.       MSELF: Lesser of $300 million (previously $200 million) and 6x adjusted 2019 EBITDA

6.       MSELF 35% Leverage Requirement Eliminated: The updated MSELF term sheet also eliminates a prong that limited MSELF loans to 35% of the borrower’s existing outstanding and undrawn available debt

7.       Unforgiven PPP Loans counted in Leverage Tests: Any outstanding PPP loan that has not yet been forgiven is counted as outstanding debt for purposes of the leverage tests noted above

8.       All SPV Participations are 95%: Participations and lender risk-retention levels are now the same across all MSLP facilities: the SPV will purchase a 95% participation in an eligible loan, and the lender will retain a 5% interest. Previously, the MSPLF had an 85/15 split.

9.       Additional Equipment Financing Exclusion for pari passu Collateral Requirement: The requirement that MSPLF loans and MSELF upsize tranches be senior to or pari passu with a borrower’s other debt in terms of security previously excluded mortgage debt (i.e., debt secured by real property at the time of the origination of the MSPLF loan or the MSELF upsize tranche). That requirement also now excludes limited-recourse equipment financing secured only by the acquired equipment.

10.   Non-Profit Plan in the Works: The Federal Reserve confirmed that it is working on a program similar to the MSLP for non-profits, which remain ineligible to participate in the MSLP.

11.   Lender Fees expanded for MSELF: Lenders may charge customary consent fees if those fees are necessary to amend existing loan documentation in the context of originating an MSELF upsize tranche.

12.   Records Requirements Updated: The updated FAQs provide more detail about what kinds of financial records a borrower must provide a lender in making certifications about EBITDA and the borrower’s financial condition.

13.   Reliance on Previous Term Sheets (Participations): The SPV will purchase participations in loans issued in reliance on the previous term sheets (issued April 30, 2020), so long as (1) the required documentation is complete and consistent with MSLP requirements under those term sheets and (2) the loan was funded prior to June 10, 2020. Note: This option will be available only during the first 14 days of the relevant MSLP facility’s operation. Any loans submitted for a participation after that time must conform with the current term sheets.

14.   Reliance on Previous Term Sheets (Amendment and Refinancing): Any loans issued in reliance on the previous term sheets may be amended or refinanced in accordance with the current MSLP terms.

Click here for a table, prepared by the Federal Reserve, highlighting some basic terms of the three MSLP facilities (including some of the changes made in the updated term sheets).

About the authors

Clayton J. Stallbaumer represents agents, lenders, borrowers, private-equity firms, and debt funds in connection with senior secured and unsecured commercial loan facilities (including enterprise-value and asset-based facilities), second-lien loan facilities, and mezzanine loan facilities.

Staci E. Rosche is senior counsel at McGuireWoods. Her practice includes a broad range of syndicated finance, project finance and equipment finance transactions.

The views and opinions set forth herein are the personal views or opinions of the author; they do not necessarily reflect the views or opinions of the law firm with which the author is associated.