Reed Smith Client Alerts

On April 9, 2020, the U.S. Federal Reserve Board of Governors (the Board) published updated terms sheets for the previously announced Primary Market Corporate Credit Facility (the PMCCF) and the Secondary Market Corporate Facility (the SMCCF), which are among the several new measures recently established by the Board to support the overall market functioning and flow of credit in the face of the COVID-19 pandemic. Under the PMCCF and SMCCF, the Board is injecting $75 billion in equity into a special purpose entity (the SPV) and leveraging such equity up to ten times to allow for a total of $750 billion in available funds to purchase corporate bonds and syndicated loans, among others. The program is being run by the Federal Reserve Bank of New York (the FRBNY), which will effectively act as a hybrid investment bank/debt fund to facilitate liquidity for certain investment-grade issuers. The financing provided by the FRBNY to the SPV will be with full recourse to the SPV and secured by all the assets of the SPV.

作者: Jared Kelly Tadashi Okamoto

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Primary Market Corporate Credit Facility (PMCCF)

The PMCCF will initially have $500 billion in capital available to make purchases of eligible corporate debt and syndicated loans directly from eligible investment-grade issuers, either as the sole investor or as a member of a syndicate.

Secondary Market Corporate Credit Facility (SMCCF)

The SMCCF will initially have $250 billion in capital available to purchase in the secondary market portions of bonds or exchange-traded funds (ETFs) whose investment objective is to provide broad exposure to the market for U.S. corporate bonds. The preponderance of ETF holdings will be of ETFs whose primary investment objective is exposure to U.S. investment-grade corporate bonds, and the remainder will be in ETFs whose primary investment objective is exposure to U.S. high-yield corporate bonds.