Federal Reserve Board Establishes Main Street Lending Programs

To facilitate the flow of credit to the economy, the Federal Reserve Board ("FRB") established the Main Street New Loan Facility and Main Street Expanded Loan Facility (collectively, the "Main Street Lending Program"), which will provide approximately $2.3 trillion in loans to small- and medium-sized businesses.

Under the Main Street Lending Program:

• federally insured depository institutions, bank holding companies, and savings and loan holding companies will be required to commit to lending to a single common special purpose vehicle ("SPV") on a recourse basis; and

• the SPV will purchase 95% participations in certain credits and the lenders will retain 5%.

In addition, the Department of Treasury will apply funds provided under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") Exchange Stabilization Fund to invest $75 billion in equity in a single common SPV.

The FRB stated that the Main Street Lending Program is intended to (i) facilitate the implementation of the Small Business Administration's Paycheck Protection Program ("PPP") by supporting the flow of liquidity to financial institutions, (ii) strengthen the flow of credit to small- and mid-sized businesses by purchasing up to $600 billion in loans through the program, (iii) expand the "size and scope" of the Primary and Secondary Market Corporate Credit Facilities (or, respectively, "PMCCF" and "SMCC"), as well as the Term Asset-Backed Securities Loan Facility, by increasing the flow of credit through capital markets and (iv) ease the burden of reduced cash flow to state and certain local governments.