ADDITIONAL FINANCIAL SUPPORT COMING FOR MIDDLE MARKET BUSINESSES

The Federal Reserve released initial details on the Main Street Lending Program designed to get liquidity into middle market businesses. This program is expected as a key step in helping middle market businesses recover from the difficult times presented by the Coronavirus. Businesses may be able to apply for a Main Street loan even if they have already applied for a Paycheck Protection Program loan. Eligible banks may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses. The following business terms are expected:

• Eligibility: The program will be available for businesses with up to 10,000 employees or up to $2.5 billion in 2019 annual revenue. The borrower must be a business that is created or organized in the United States, with significant operations in and a majority of its employees based in the United States.
• Term: 4- year maturity
• Amortization: Principal and interest deferred for one year
• Interest Rate: Adjustable interest rate based on the Secured Overnight Funds Rate plus 250-400 basis points
• Prepayment permitted without penalty
• Maximum Loan:
  • Main Street Expanded Loan Facility (MSELF): Maximum loan size that is the lesser of (i) $150 million, (ii) 30% of the eligible borrower’s existing outstanding and committed but undrawn bank debt, or (iii) an amount that, when added to the eligible borrower’s existing outstanding and committed but undrawn debt, does not exceed six times the eligible borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (“EBITDA”);
  • Main Street New Loan Facility (MSNLF): Maximum loan size that is the lesser of (i) $25 million or (ii) an amount that, when added to the eligible borrower’s existing outstanding and committed but undrawn debt, does not exceed four times the eligible borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (“EBITDA”); 
• MSNLF are unsecured. MSELF are collateralized based on the discretion of the lender.

Loan restrictions

• Limitation on paying down debt
• Limitation on increasing compensation
• Limitation on stock repurchase and capital distributions
• Commitment to make reasonable efforts to maintain payroll and retain employees during the term of the loan
• Borrowers will be required to attest to certain conditions, including that the borrower requires financing due to the exigent circumstances presented by the coronavirus disease 2019 (“COVID-19”) pandemic

UHY advisory services will be monitoring new developments of the Main Street Loan Program closely and will provide additional guidance when applicable.