Yesterday the Fed announced details on the much anticipated “Main Street Lending program” which is intended to provide up to $600B in loans to medium-sized companies. Below is a quick summary of some of the key points:

  • Interest Rates. Loans will be adjustable rate priced at the Secured Overnight Financing Rateor “SOFR” (the Fed’s alternative to Libor) plus 250 to 400 basis points and a 100 basis point origination/facility fee.
  • Loan Term. Four-year terms with no principal or interest due the first year.
  • Eligible Borrowers. Eligible borrowers include companies with up to 10,000 employees or annual revenues below $2.5B. Smaller companies with less than 500 employees can double up by using both the Main Street Program and the Small Business Administration PPP loan program.
  • Limits. Borrowers cannot exceed four times 2019 EBITDA on a new loan.
  • Restrictions. Conditionality is based on the “direct loans” requirement of the stimulus law which means no buybacks, no dividends and restrictions on executive compensation for the term of the loan plus an additional year plus the add-ons of “reasonable efforts” to maintain employment and payrolls. Proceeds cannot be used to repay existing loans or debt of equal/junior priority or to replace existing lending facilities on the part of the originating lender.