New term loan.

Note that if the eligible borrower had other loans outstanding with the eligible lender as of December 31, 2019, such loans … The complication caused by the compensation and dividend restrictions to business operations and the ability to compensate equityholders alone are enough to dampen interest in a seller/target (or if the acquiror has entered into a Main Street Loan, to depress what the acquiror can offer to the seller/target). .breadcrumb-dark li {

vertical-align: top; [v] See FAQ E.12, Borrower Certifications and Covenants, Section 1.D.

In addition, the borrower’s organizational documents and loan documents should be carefully reviewed to determine whether consents must be obtained before accepting the Main Street Loan, as the dividend restrictions may conflicts with the requirements of such documents. This webinar will provide you with additional background on the program such as who is eligible, what are the terms of the loans, and where can you submit a loan application.

Morningstar: Copyright 2018 Morningstar, Inc. All Rights Reserved. [i] Sheppard Mullin’s chart that summarizes and compares the three types of Main Street Loans can be found here. Eligible lenders are U.S. federally-insured depository institutions (including banks, savings associations, and credit unions) as well as any U.S. branch or affiliate of a foreign bank. As with other lending facilities, the Federal Reserve announced that it will follow extensive reporting procedures around the Main Street Lending Program by reporting on a monthly basis: Eligible borrowers that participate in any Main Street Lending Program facility should make commercially reasonable efforts to maintain its payroll and retain its employees during the time that the term loan is outstanding. Main Street borrowers face similar concerns with respect to the conflict of interest requirements under CARES Act Section 4019. [xvii] The Main Street SPV or another government agency could bring an enforcement action, and may have varying motivations to do so (such as political pressure or popular sentiment). So he walks to school, Restaurant owner: We're back where we started in March, Here's how a Covid-19 vaccine could help the global economy, Mom of three: They shouldn't have to worry how we can eat the next day, Ohio mom facing eviction: I'm just thinking about my kids, Furloughed worker: 'I'm at the top of the roller coaster with no harness', Mom juggling work and remote learning: I can't maintain this. } .breadcrumb-dark { The cornerstone of a healthy M&A strategy is thoughtful due diligence. By scrolling this page, clicking a link or continuing to browse our website, you consent to our use of cookies as described in our Cookie and Advertising Policy. Overview and Comparison of Certain Main Street Lending Program Facility Terms . For good reason, the debt and lien structure of the target and the post-transaction combined entity tends to attract great attention in M&A deals.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Lender Registration Certifications and Covenants, Loan Participation Agreement Standard Terms and Conditions, Co-Lender Agreement Standard Terms and Conditions, MSNLF Lender Transaction Specific Certifications and Covenants, MSELF Lender Transaction Specific Certifications and Covenants, MSPLF Lender Transaction Specific Certifications and Covenant, NONLF Lender Transaction Specific Certifications and Covenants, NOELF Lender Transaction Specific Certifications and Covenants, MSNLF Borrower Certifications and Covenants, MSELF Borrower Certifications and Covenants, MSPLF Borrower Certifications and Covenants, NONLF Borrower Certifications and Covenants, NOELF Borrower Certifications and Covenants, Exclusion of PPP Loan from Main Street “Outstanding Debt”, Main Street Lending Program Instructions for Lender Required Documentation, Comparison to September 18, 2020 Instructions, Comparison to May 27, 2020 Lender Registration Certifications and Covenants, Participation Agreement Transaction Specific Terms, Comparison to July 31, 2020 Participation Agreement Transaction Specific Terms, Participation Agreement Standard Terms and Conditions, Comparison to June 11, 2020 Participation Agreement Standard Terms and Conditions, Comparison to July 31, 2020 Servicing Agreement, Comparison to June 11, 2020 Assignment-in-Blank, Co-Lender Agreement Transaction Specific Terms, Comparison to June 11, 2020 Co-Lender Agreement Transaction Specific Terms, Comparison to June 11, 2020 Co-Lender Agreement Standard Terms and Conditions, Comparison to June 11, 2020 MSNLF Lender Transaction Specific Certifications and Covenants, Comparison to June 11, 2020 MSELF Lender Transaction Specific Certifications and Covenants, MSPLF Lender Transaction Specific Certification and Covenants, Comparison to June 11, 2020 MSPLF Lender Transaction Specific Certifications and Covenants, Comparison to July 31, 2020 NONLF Lender Transaction Specific Certifications and Covenants, Comparison to July 31, 2020 NOELF Lender Transaction Specific Certifications and Covenants, MSELF Borrower Certification and Covenants, MSPLF Borrower Certification and Covenants, Comparison to September 18, 2020 Nonprofit Organization FAQs, Participation Agreement Transaction Specific Terms, MSPLF Lender Transaction Specific Certifications and Covenants.
This alert is provided for information purposes only and does not constitute legal advice and is not intended to form an attorney client relationship. All content of the Dow Jones branded indices Copyright S&P Dow Jones Indices LLC 2018 and/or its affiliates. If the parties expect the borrower to compensate one or more of its owners for services, care should be taken to structure the payment as a contractual obligation. The most notable concerns in an M&A context are: As the parties to an M&A transaction explore alternative structures to accommodate the Main Street Lending Program’s dividend restrictions, careful tax planning is essential to ensure the most efficient, or at least predictable, tax outcomes. If you do not wish to accept cookies from our website, or would like to stop cookies being stored on your device in the future, you can find out more and adjust your preferences here. display: inline-block;

As a punitive measure, the Federal Reserve ordered Wells Fargo to keep its overall assets capped to $1.95 trillion in 2018, until it improved its overall banking operations. The necessary legal forms and agreements for eligible borrowers and eligible lenders to participate in the MSNLF, MSELF, MSPLF, NONLF, and NOELF can be found below. EBITDA: Earnings before interest, tax, depreciation and amortizationLIBOR: London Interbank Offer Rate, a common benchmark interest rate index. "If you look at the law ... it's very clear that we are to make loans only to solvent borrowers," he said at that time.

margin-top: 0; Under certain scenarios, even execution of a letter of intent could render such party ineligible. Businesses that have already laid-off or furloughed workers as a result of COVID-19 are still eligible to apply for Main Street loans. The Main Street Lending Program funds are slated to come through the nation’s top banks, which still require an application for those loans. Parties should not wait to share this basic information, which itself could determine whether one party or the other is even willing to transact. Parties should not assume that representation and warranty insurance (RWI), directors and officers (D&O) or other insurance will be accessible to cover exposures.

[vi] This is a very fact-specific review of the extent to which the parties are conducting open discussions or have solidified the key terms of the deal such that they are considered to have a present intention to consummate the deal. As statutory obligations, the restrictions also cannot be avoided or extinguished simply by repaying the Main Street Loan, which is an option in ordinary loan arrangements. [xvi] The same concerns expressed in this paragraph apply to the public company stock buyback restrictions, which are contained in Section 4003(c)(3)(A)(ii) of the CARES Act (along with the compensation and dividend restrictions), and the conflict of interest provisions, which are derived from CARES Act Section 4019. The SBA’s affiliation rules apply in determining the employee and revenue count; In counting employees, the Main Street Lending Program advises businesses to refer to SBA regulations by counting all full-time, part- time, seasonal, or otherwise employed persons, excluding volunteers and independent contractors All Rights Reserved. See our discussion above re Timing of the M&A Transaction and Agreement in Principle. . Both parties are likely to have a vested interest in audits or investigations, especially those conducted by the US government entities. The Main Street Lending Program funds are slated to come through the nation’s top banks, which still require an application for those loans. Listen for free every weekday on Apple Podcasts, Google Podcasts, Spotify, the ABC News app or wherever you get your podcasts. Banks, however, are struggling to keep up with the demand to assist thousands of small businesses vying for billions in government-funded loans.

Turn on desktop notifications for breaking stories about interest? The Main Street Lending Program, intended to provide credit support to small and medium sized businesses, became operational on July 6, 2020. border: none;

Similar to the compensation restrictions, a borrower that is either a potential acquiror or potential target needs to consider how the dividend restrictions may impact their contemplated transaction. font-size: 16px; If the parties expect a borrower to provide regularly scheduled distributions, such arrangements would need to be structured in the form of another payment instrument such as subordinated debt, a management agreement or other contractual arrangements. While the program’s start date has yet to be announced, here’s what you need to know to check eligibility and get ready to apply.

From shipping to staffing, the Chamber and its partners have the tools to save your business money and the solutions to help you run it more efficiently. The Program operates through five facilities: the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), the Main Street Expanded Loan Facility (MSELF), the Nonprofit Organization New Loan Facility (NONLF), and the Nonprofit Organization Expanded Loan Facility (NOELF). Coronavirus (COVID-19): Relief options and Additional Resources. Legal Documents.

The Main Street Lending Program was initially announced by the Federal Reserve in March 2020 as a way to support small-to-medium sized businesses affected by the economic crisis surrounding COVID-19. [ix] It is worth clarifying that if either party to an M&A transaction has a pending application for a Main Street Loan (but has not actually received it), the transaction could still render the applying party ineligible if the other party has a Main Street Loan. [xiv] Note, however, that the permission does not appear to cover distributions made by a consolidated corporate subsidiary to the common parent corporation to enable that common parent to pay its consolidated corporate income tax liability. “The money will be there.”. Citibank, which earlier in the week said it was not accepting loan applications, said today in a statement that it “will be reaching out to existing Citi Small Business Banking clients in phases” to begin the process.

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Business Guide.

New York (CNN Business)The Federal Reserve is changing the rules of its Main Street Lending Program to help smaller businesses that have been struggling to get by while waiting for additional stimulus from Congress. Not sure where to start? }

ET every weekday for special coverage of the novel coronavirus with the full ABC News team, including the latest news, context and analysis. [xiii] See Borrower Certification and Covenants Instruction and Guidance, 2.D.

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