Reed Smith Client Alerts

On May 27, 2020, the Federal Reserve released further guidance on the Main Street Lending Program (the Program), updated its Frequently Asked Questions (the FAQs) and provided agreements and forms for the Program’s three facilities: the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF).
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Lender eligibility

Under the Program, “eligible lenders” include U.S. federally insured depository institutions (including banks, savings associations, and credit unions), U.S. branches or agencies of a foreign bank, U.S. bank holding companies, U.S. savings and loan holding companies, U.S. intermediate holding companies of a foreign banking organization, or U.S. subsidiaries of any of the foregoing.

Key takeaways for lenders from the updated guidance

A. Loan documentation. Lenders should use their own loan documentation that is used in the lender’s ordinary course of business, but such documentation must include the required components listed below.

B. Compliance program. Lenders who participate in the Program must implement and maintain a related compliance program and systems for the life of its Program loans plus an additional year.

C. Interest rate. Program loans must have an interest rate of LIBOR (1 month or 3 month) + 300 basis points.

D. Fees. Lenders may charge borrowers a one-time origination fee as per the Program’s term sheets. Lenders may also require borrowers to bear the cost of the transaction fee that lenders are required to pay to the Program’s special purpose vehicle (the Main Street SPV). Other than these fees and customary and necessary de minimis fees for services in connection with lenders’ underwriting of commercial industrial loans (such as appraisal and legal fees), lenders may not charge borrowers any additional fees. The FAQs further specify that lenders may not charge servicing fees to borrowers.