Key takeaways from the updated FAQs

• Eligible borrowers
  • A business that received a loan through the Small Business Administration’s Economic Injury Disaster Loan program can be an eligible borrower under the Program if it meets the eligible borrower criteria.
  • Further, the Federal Reserve provided guidance on how eligible borrowers should prepare financial records and determine inputs to their 2019 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) calculation in connection with the borrower certifications and covenants.
• Mortgage debt. The definition of “mortgage debt” was updated to include limited recourse equipment financings secured only by the acquired equipment.
• MSELF upsized tranche. More than one lender under an existing multi-lender facility may choose to “upsize” the existing facility to originate an MSELF upsized tranche. However, an eligible lender may not share its 5 percent retention of the MSELF upsized tranche with other members of a multi-lender facility.
• Nonprofit organizations. The Federal Reserve announced that it is working to establish one or more loan options for nonprofit organizations.
• Outstanding debt. The portion of any outstanding Paycheck Protection Program loan that has not yet been forgiven is counted as outstanding debt for the purposes of the Program maximum loan size test.
• Participation interests
  • True participations. The FAQs clarified that the participation interests purchased by the Main Street SPV in MSNLF loans, MSPLF loans and MSELF upsized tranches are true participations.
  • True sale. The updated guidance also spelled out that the sale of a participation interest in an MSNLF loan, an MSPLF loan, or an MSELF upsized tranche is structured to be a true sale, and that the Program transaction terms are consistent with a true sale.
    • The Federal Reserve Bank of Boston has also covenanted that it will not assert in any proceeding that the sales of the participation interests are anything other than true sales constituting true participations.
  • Safe harbor. The FAQs made clear that the Federal Reserve has structured the transfer of the interests in financial assets under the Program’s participation agreement from the eligible lender to the Main Street SPV with the intent that it would qualify for a “safe harbor” in relation to Federal Deposit Insurance Corporation and National Credit Union Association resolution proceedings.
• Conformance with April 30, 2020 Program terms. The FAQs confirmed that the Main Street SPV will purchase participations in issued MSNLF loans, MSPLF loans and MSELF upsized tranches that rely on the April 30, 2020 Program term sheets. However, it is important to note that the Main Street SPV will only purchase such Program loans during the first 14 days of the relevant facility’s operation, provided that (i) the required documentation is complete and consistent with the Program requirements set forth in the April 30, 2020 Program term sheet and (ii) the loan was funded prior to June 10, 2020. Further, issued Program loans that rely on the April 30, 2020 term sheets may be amended or refinanced in accordance with the June 8, 2020 Program term sheets.

Additional changes are set out in the chart below.

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