National Association of Electrical Distributors — Dear Board Members, Federal Reserve Board (April 16, 2020)
Summary
Compilation of public comments to the Federal Reserve on the Main Street Lending Program term sheets. A comment dated April 16, 2020 from the National Association of Electrical Distributors objects to the provision requiring borrowers to deduct committed but undrawn debt from their maximum loan, saying asset-based lending is common in the electrical wholesale industry, and proposes substitute language. A comment dated April 10, 2020 from the Native American Finance Officers and the National Congress of American Indians to Secretary Mnuchin and Chairman Powell addresses implementation of Title IV of the CARES Act for tribal governments. The positions are the commenters' own.
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“National Association of Electrical Distributors — Dear Board Members, Federal Reserve Board (April 16, 2020).”
Original at www.federalreserve.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/federal-reserve-public-comments-6-pdf-www-federalreserve-gov-595973a29-900e268c1c/
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NATIONAL ASSOCIATION OF
ELECTRICAL DISTRIBUTORS
•
•
April 16, 2020
Federal Reserve Board
20th Street and Constitution Avenue, N.W.
Washington, D.C. 20551
Dear Board Members:
The National Association of Electrical Distributors is concerned by a provision in the Main
Street New and Expanded Loan Facility term sheets that requires a borrower to calculate
and deduct from its maximum loan the amount of its "committed but undrawn debt."
Depending on the purpose of this provision, NAED members could face unintended
conseq uences with their current lenders.
It is a common practice in the electrical wholesale industry for companies to use asset
based lending as a form ofsecured borrowing to fund inventory needs. In many cases as
much as 20 to 30 percent is treated as a "cushion" by lenders and is only accessible to the
borrower at the cost ofadditional fees and penalties or limitations on operations. If the
intention is to require borrowers to use undrawn debt prior to taking out any loans from
the Main Street Lending Program, many distributors will be negatively impacted.
Electrical wholesalers may be uniquely impacted by the "committed but undrawn debt"
restriction because use of that credit method is widely used to fi nance inventory, and we
would therefore ask that you consider removing that condition from the term sheets. This
solution can be accomplished by substituting "available" for "committed" in item 5 and by
adding the following: "For purposes ofdetermining the eligible loan amount (or, for
purposes of this provision), an eligible borrower's existing outstanding and available but
undrawn bank debt does not include any amount that, if drawn, would cause the Borrower
to suffer fees, penalties, restrictions, or limitations on its operations. Lease financing
obligations are also excluded."
If that solution is not possible, we urge the Federal Reserve to modify the term sheets to
allow borrowers to calculate their loan amounts using only the amount of "committed but
undrawn debt" that is available to them without punitive bank responses. This can be
accomplished by adding the following: "For purposes ofdetermining the eligible loan
amount (or, for purposes of this provision), an eligible borrower's existing outstanding and
committed but undrawn bank debt does not include any amount that is not currently
available under the terms of the facility, nor does it include any amount that, if drawn,
would cause the Borrower to suffer fees, penalties, restrictions, or limitations on its
operations. Lease financing obligations are also excluded."
1181 Corporate Lake Dr. I St. Louis, MO 63132
T: 888-791-2512 I F: 314-991-3060 I www.naed.org
NATIONAL ASSOCIATION OF
ELECTRICAL DISTRIBUTORS
•
•
We believe this program was meant to help our members maximize access to capital during
this unprecedented disruption in national economic activity. Please consider these logical
fixes that will put our members in the best position to continue to serve their customers
and their communities.
Sincerely,
&(l~r
Edward M. Orlet
Senior Vice President for Government Affairs
1181 Corporate Lake Dr. I St. Louis, MO 63132
T: 888-791-2512 I F: 314-991-3060 I www.naed.org
National
NAFOA Congress or
America n
Indians
1101 30TH STREET, NW EMBASSY OF TRIBAL NA TTONS
SUlTE 500 l 516 P STREET NW,
W /\SI llNGTON, DC 20007 W/\SI llNGTON, DC 20005
April 10, 2020
The Honorable Steven Mnuchin The Honorable Jerome Powell
Secretary of the Treasury Chair of the Board of Governors
U.S. Department ofTreasury The Federal Reserve
1500 Pennsylvania Avenue, NW 2051 Constitution A venue, NW
Washington, D.C. 20220 Washington, DC 20551
RE: Implementation of Title IV of Public Law 116-136, the Coronavirus Aid, Relief, and
Economic Security Act (CARES Act).
Dear Secretary Mnuchin and Chairman Powell,
On behalf of the tribal governments that we collectively represent in matters of economic
development and governance, the Native American Finance Officers (NAFOA) and the National
Congress of American Indians (NCAJ) would like to express our appreciation for your willingness
to accommodate the unique needs of Indian tribes in credit relief. We stand ready to work in
partnership to create responsive and necessary solutions.
Title IV, the Economic Stabilization and Assistance to Severely Distressed Sectors of the US.
Economy (Economic Stabilization Fund), has the potential to provide flexible and prompt
financing and credit relief that tribal governments need during this time of unce11ainty and
unparalleled stress. Like other governments dealing with the impacts of this crisis, tribal
governments need to provide front line care for the well-being of their people. However, tribal
governments are much more vulnerable during this crisis since tribal governments are dealing with
mitigating elevated health risk factors while also directly managing the devastating economic
impacts caused by the shuttering of government enterprises.
Tribal governments, in lieu of a tax base, rely on economic revenue to provide fundamental
government programs and services. The revenue from this equivalency ofa tax base has not simply
dipped, as experienced by other state and local governments, it has ceased to exist in most cases.
l
All at a time when government expenses will rise to meet the health crisis, credit will diminish for
government-owned economic enterprises, and existing government expenditures will no longer
have the revenue to support their initial purpose.
The reasons stated warrant the full attention of the federal government to take all appropriate and
immediate action to ensure tribal government funding sources are supported. A key component of
that tribal government support is ensuring their economic engines remain viable and are able to
recover. Without action from the federal government, tribal government debt will be on a path to
default impacting not just the tribal governments and their citizens, but the surrounding
communities that rely on tribal enterprises for their support. Tribal governments are often the
largest employers in their respective areas, states, and for some, entire regions. Taken together
they would represent one of the top ten employers in the nation.
The stability and recovery of the tribal economies can be achieved with consideration of the unique
aspects of the tribal debt market and a proportionately unique and discretionary response from the
Department of Treasury and the Federal Reserve Bank. The intent of Congress was clear in
including tribal governments in Title IV of the CARES Act such that the Federal Reserve Bank
would provide financing opportunities in this economic crisis. However, we are concerned that the
first facility for governments under this title does not allow direct access for tribal governments
and further relies on an assumption that other government relief facilities and business relief
facilities will assist tribal governments. We can assure you with centuries of experience, that is a
false assumption and one that would have devastating economic consequences.
With the shared goal of building a system that will work for Indian Country, we are outlining the
characteristics oftribal debt and the terms that will help guide the Department of the Treasury and
the Federal Reserve Bank toward effective intervention. We will also continue to urge flexibility
as the crisis continues to evolve along with its impacts and strongly request that you modify
programs that fail to incorporate tribal governments needs as originally proposed.
Tribal Debt Characteristics
Tribal governments occupy lands held in trust for their use by the federal government. These trust
lands can't be leveraged or used as collateral. Debt issued to tribal governments is largely based
on government (federal funds, enterprise, and lease) revenue as general obligations of the
government or their political subdivisions. The tribal or tribal entity distressed debt is concentrated
on a few large sectors that make up a large part of the Indian Country economy - gaming,
hospitality, and natural resource extraction. These sectors are either shut down entirely or
effectively shut down due to depressed pricing, as is the case with oil.
The majority of debt is private bank debt with one or more banks as lenders, not publicly traded
as is common in the state and municipal markets. There are, however, a few outstanding public
issuances (taxable and tax-exempt) that represent approximately $6 bill ion of the total tribal debt
offerings. Larger issuances of public and private debt involve mostly banks with some
participation by institutions and individuals. For these reasons restrictions that focus on market
debt with credit ratings can create significant challenges. The Fed has used programs that provide
banks financial incentives, liquidity, and credit support, for placement of direct loans for private
2
businesses (such as the Main Street Lending Program) . Figuring a way to make this work for tribal
government debt is critical.
Tribal governments have the ability to issue both taxable and tax-exempt debt with a majority
issued as taxable. Tax-exempt debt for tribal governments for economic or private activity
purposes differs from the tax-exempt debt issued by other governments. Tribal governments are
prohibited from fully utilizing the tax-exempt debt market beyond the tightly defined purposes of
essential government functions; leaving tribal governments no choice but to use commercial debt
to fund marinas, conference centers, parking lots and other services commonly funded by state and
local governments.
As a partial remedy for this restriction, the Department ofthe Treasury under the Tribal Economic
Development Bond program authorized by Congress during the American Recovery and
Reinvestment Act provided $2 billion in bonding authority for economic rebuilding purposes. Not
all of these issuances have been rated, but all TED bonds have been registered at the Department
of the Treasury. The entire allocation has been recently drawn down and is no longer an option.
This means that existing tribal tax-exempt debt is either general obligation government debt for
essential services or issued as Tribal Economic Development Bonds through the prior allocation.
Tribal debt is issued directly from the tribal government, its political subsidiaries, or directly from
government-owned enterprises. The government subdivisions may include an economic
development authority, a gaming authority, or a business entity listed as part of the governing body
but separated for tax and business purposed.
Below are four specific potential terms on which you could intervene to fulfill your statutory and
economic obligations to tribal governments. This list is a subset of potential solutions, intended to
help you and your staff during these challenging times.
Proposed Terms of Intervention
• The Federal Reserve bank should purchase loans or lines or credit to facilitate better terms
or credit for tribal governments and their authorities. Relief should be considered in two
forms. First, direct purchasing of debt from banks and investors for temporary reliefduring
the crisis.
Second, consideration should be given to loan guarantees on new tribal debt to secure
needed lines of credit during the crisis and for securing reasonable credit when revenue
streams do recover and tribal governments need to re-issue the debt. During the last
downturn, lending continued to be tight for tribal governments long after the recovery was
taking place. Either could be accomplished through one of several existing Fed facilities,
simply by modifying eligibility terms and work through financial institutions or Tribes.
• Current purchasing of debt should include setting aside $25 billion for direct purchasing of
tribal government debt. The Federal Reserve Bank's initial announcement of direct
purchases of debt from cities greater than 1 million and counties greater than 2 million
excludes all Tribes. The catch-all of having tribes go through a state governor's offices is
3
a failure to acknowledge the direct government-to-government sovereign relationship that
is the foundation of American Indian policy. The first amortizing payment should be due
no earlier than 180 days after issuance and no later than 365 days given that tribal
government revenues from enterprises have ceased. Consideration should be given to a
favorable loan term of at least a five-years with the going treasury interest rate to match
the term.
• Assistance from the funds established in Title IV should include loan guarantees for short
term credit facilities and for on-going enterprises that may need credit for restarting an
enterprise, continued operations, including those that may be tied to similar revenue
pledged for distressed debt. Loan guarantees should be pledged to secure approximately
$30 billion in debt.
• The Federal Reserve Bank should consider the ability to purchase tribal debt based on tribal
revenue prior to the crisis. The majority of tribal government debt is unrated making
revenue a suitable criterion. However, tribal enterprises often have geographic and political
competitive buffers that make loans viable. In addition, given the uncertainty of the crisis,
these loans should be subject to repayment only from revenue from existing and future
tribal businesses and not be subject to garnishment of any other programs or transfers of
federal aid to tribal governments.
We would strongly urge the Department of the Treasury and the Federal Reserve Bank to
immediately engage Indian Country on the Economic Stabilization Fund. Thank you in advance
for your consideration of our requests. Please feel free to reach out to either organization through
Dante Desiderio by phone at 202-631-2003 or by email at Dante@nafoa.org
Best regards,
~~~ /
Dante Desiderio, Kevin J. Allis,
Executive Director Chief Executive Officer
National Congress of American Indians
CC: Gary Grippo, Deputy Assistant Secretary for Government Financial Policy
Daniel Kowalski, Counselor to the Secretary for Domestic Affairs
Lael Brainard, Federal Reserve Board Governor
Richard Clarida, Federal Reserve Board Governor
Randall Quarles, Federal Reserve Board Governor
Michelle Bowman, Federal Reserve Board Governor
4
M Manufacturers NA IONAL ASSOCIATION 0
Chris Netram
Vice President,
Tax and Domestic Economic Policy
April 20, 2020
The Honorable Jerome Powell
Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW
Washington, DC 20551
Dear Chairman Powell,
The National Association of Manufacturers appreciates the Federal Reserve’s efforts to stabilize the
economy via lending facilities designed to provide needed liquidity to businesses impacted by COVID-
19. Speedy delivery of aid to manufacturers affected by the crisis is a key component of the NAM’s
advocacy.
Manufacturers of all sizes are facing significant business disruptions due to the COVID-19 crisis. As
such, the NAM appreciates that the Federal Reserve has announced a wide range of liquidity facilities
to meet the needs of small, medium-sized, and large businesses across the country. As you finalize the
details of these programs in the coming weeks, it is vital that the terms and processes related to the
various facilities collectively enable participation for any and all manufacturers in need of liquidity.
Furthermore, the NAM encourages you to continue to provide clarity on key questions regarding the
operation of the facilities, qualifications for participation, and processes for application and approval to
enable businesses to make decisions on how best to protect themselves and their employees during
these difficult times.
I. Main Street Lending Program
The NAM welcomed Congress’s work via the Coronavirus Aid, Relief, and Economic Security (CARES)
Act to authorize a new program to support lending to small and medium-sized businesses. We
appreciate that the Federal Reserve is now taking steps to implement the Main Street New Loan Facility
(MSNLF) and the Main Street Expanded Loan Facility (MSELF) to meet the capital needs of the wide
range of small and medium-sized businesses that need financing to weather the economic disruption
caused by COVID-19.
The Main Street Lending Program should address the needs of these smaller companies, which may
not qualify for the Federal Reserve’s facilities designed for larger businesses. The NAM encourages
you to implement program qualifications and loan terms that ensure that small and medium-sized
manufacturers can access needed funding via the Main Street Lending Program.
• Decrease the minimum loan size. The Main Street Lending Program has a minimum loan
amount of $1 million, but many small and medium-sized companies may need less financing
based on their payroll and operating expenditures. For example, the data released by the Small
Business Administration on the Paycheck Protection Program indicated that the average loan
size for manufacturers was roughly $375,000. In fact, 96% of all loans approved under the PPP
were for less than $1 million. While the overlap between the PPP and the Main Street Lending
Program is not perfect, the Main Street terms should not exclude 96% of PPP businesses.
Accordingly, the NAM encourages you to decrease the minimum loan size for the Main Street
1
Lending Program so as to allow more small businesses to participate in the MSNLF and
MSELF.
• Allow for alternative methods of calculating loan amounts. Many businesses that would
otherwise qualify for the Main Street Lending Program may find their participation limited by the
maximum loan calculations for the MSNLF and MSELF, which rely on a borrower’s 2019
earnings before interest, taxes, depreciation, and amortization (EBITDA). Some small, pre-
revenue, or start-up companies may not have sufficient earnings from 2019 to qualify for a
meaningful loan amount (or perhaps for any loan at all) if the calculation must be based on
EBITDA. These businesses may have other metrics that would better illustrate an appropriate
loan size, including assets, tangible net worth, or payroll. The Federal Reserve should allow for
flexibility for these small businesses and permit alternative metrics for determining the maximum
loan amount beyond the proposed EBITDA calculations.
• Reform the undrawn debt restriction. The Main Street program’s maximum loan calculations
require a borrower to reduce its potential loan total by the amount of its existing outstanding and
committed but undrawn debt. Many companies have undrawn debt that is nevertheless
unavailable to them without the imposition by their lender of fees, penalties, restrictions, or
limitations on their operations. (This undrawn debt is viewed as a “cushion” by lenders and is
thus not truly available for businesses to draw down.) We encourage the Federal Reserve to
modify the undrawn debt language in the MSNLF and MSELF maximum loan calculations to
clarify that the maximum loan size should only be reduced by the amount of debt that is
available to a borrower to be drawn without the imposition of fees, penalties, restrictions, or
limitations on its operations.
• Provide clarity on affiliation rules. The Main Street Lending Program is available to
businesses with up to 10,000 employees or up to $2.5 billion in 2019 annual revenues. The
NAM urges you to clarify that these and any other eligibility tests apply to the business applying
for the loan on a standalone basis, not on a consolidated basis incorporating a small business’s
affiliates, parents, or parents’ subsidiaries.
• Encourage lenders to participate in the program. It is vital that lenders feel comfortable with
the risk profile associated with offering loans under the Main Street program. Small and
medium-sized manufacturers desperately need access to liquidity to weather the current
economic storm, so the NAM encourages the Federal Reserve to take reasonable steps to
ensure that lenders will participate in the Main Street program. For example, the Federal
Reserve could consider increasing the Main Street facilities’ 95% participation rate in a new
loan or an upsized loan tranche.
• Provide clarity to businesses on implementation questions. Given the speed with which the
Federal Reserve plans to implement the new Main Street program, it is vital that lenders and
borrowers understand the requirements to offer and access loans, respectively. We urge the
Federal Reserve to announce and implement clear guidelines around eligibility, applications,
processes, loan terms, and more in order to ensure smooth implementation of the program and
allow small businesses to access needed funds.
II. Larger Business Liquidity Facilities
Over the past several weeks, the Federal Reserve has announced several facilities to provide liquidity
to a wide range of businesses dealing with the economic consequences of COVID-19. These facilities—
including the Primary Market Corporate Credit Facility (PMCCF), Secondary Market Corporate Credit
Facility (SMCCF), Term Asset-Backed Securities Loan Facility (TALF), and Commercial Paper Funding
Facility (CPFF)—are designed to inject capital into the U.S. economy and provide support for American
businesses and workers. The NAM encourages the Federal Reserve to address certain key issues
2
related to these liquidity facilities in order to improve access to needed funding and speed America’s
economic recovery.
PMCCF, SMCCF, and TALF
• Allow all companies with a significant U.S. presence to receive financing. The NAM
believes that the Federal Reserve should focus on the impact to U.S. workers when determining
eligibility for its various liquidity facilities. As announced, the PMCCF, SMCCF, and TALF (as
well as the Main Street Lending Program’s MSNLF and MSELF) limit participation to businesses
with a majority of employees based in the United States. In the NAM’s view, the number of
workers outside the United States is immaterial to the American families who are depending on
their employers to continue to make payroll during the crisis. The Federal Reserve should
ensure that all businesses with a significant presence in the United States—including
businesses with foreign subsidiaries and/or foreign employees and U.S. subsidiaries whose
parents are foreign-based or have foreign subsidiaries and/or foreign employees—are eligible
for these vital programs and can access capital for the benefit of their employees based in the
United States. Furthermore, the NAM believes that any tests designed to quantify a business’s
U.S. presence should be applied on a standalone basis rather than by consolidating employees
or economic activity on an enterprise-wide basis.
• Clarify the “specific support” prohibition for PMCCF and SMCCF issuers. The term sheets
released for the PMCCF and SMCCF exclude businesses that have received “specific support
pursuant to the CARES Act or any subsequent federal legislation.” The Federal Reserve should
clarify that this prohibition does not apply to businesses participating in programs that were
upsized via CARES Act Section 4003(b)(4) funds, which does not constitute “specific support”
sufficient to exclude them from the PMCCF and SMCCF. The Federal Reserve should also
clarify that businesses that benefitted from generally applicable provisions in the CARES Act,
such as the law’s tax provisions, would similarly not be excluded from the PMCCF and SMCCF.
• Provide clarity on the applicability of certain CARES Act restrictions. Section
4003(c)(3)(A)(ii) of the CARES Act restricts direct loans provided via facilities funded using
Section 4003(b)(4) dollars to businesses that comply with certain restrictions on share
repurchases, dividend payments, and executive compensation. Because these restrictions only
apply to businesses receiving direct loans dispersed via CARES Act-funded facilities, the
Federal Reserve should clarify that they do not apply to businesses participating in the PMCCF,
SMCCF, or TALF. These facilities were upsized using CARES Act funds, but they are not direct
loan facilities and, thus, participating businesses should not be subject to the Section
4003(c)(3)(A)(ii) restrictions.
• Expand the PMCCF and SMCCF to non-investment grade issuers. The term sheets
released for the PMCCF and SMCCF limit participation in the facilities to issuers with at least a
BBB-/Baa3 rating from a major nationally recognized statistical rating organization (NRSRO).
However, many manufacturers, including those in the basic materials sector and its domestic
supply chains, are “single-B” rated companies. These businesses are critical to sourcing
materials, producing goods in the United States, and stimulating the American economy. The
investment-grade prohibition limits participation from these healthy companies, many of which
would otherwise qualify for and benefit from the PMCCF and SMCCF. The NAM encourages
the Federal Reserve to relax this requirement and allow non-investment grade issuers, including
at least issuers with a B-/B3 rating, to access needed financing via the facilities.
• Expand the pool of acceptable PMCCF and SMCCF ratings agencies. As noted above,
qualification for the PMCCF and SMCCF is determined based on an issuer’s rating from a major
NRSRO. The Fed should provide flexibility by clarifying that ratings from any SEC-registered
NRSRO, not just a major NRSRO, are sufficient for determining qualifications for both facilities.
3
CPFF
• Expand the CPFF to Tier 2 issuers. The term sheet released for the CPFF limits participation
to issuers that have been rated at least A1/P1/F1 by a major NRSRO. Expanding CPFF
participation to include Tier 2 issuers would not expose the facility to significantly higher credit
risk but would allow a wider range of companies to access needed liquidity. The NAM
encourages the Federal Reserve to relax the Tier 1 limitation, allowing for issuers to benefit
from the CPFF if they have been rated at least A2/P2/F2.
• Expand the pool of acceptable CPFF ratings agencies. As noted above, qualification for the
CPFF is determined based on an issuer’s rating from a major NRSRO. The Fed should provide
flexibility by clarifying that ratings from any SEC-registered NRSRO, not just a major NRSRO,
are sufficient for determining qualifications for the CPFF.
• Increase per-issuer purchase limits under the CPFF. The term sheet released for the CPFF
sets the maximum amount of an issuer’s commercial paper that the CPFF special purpose
vehicle may own as the greatest amount of commercial paper that the issuer had outstanding
between March 16, 2019 and March 16, 2020. However, a one-year lookback to a period of
strong economic performance is not indicative of a business’s potential need to participate in
the CPFF during the current economic crisis. The Federal Reserve should instead allow the
CPFF special purpose vehicle to purchase commercial paper up to the amount authorized
under an issuer’s existing program, whether or not it had any commercial paper outstanding
during the one-year window.
****
The NAM has welcomed the Federal Reserve’s aggressive actions to provide for new and expanded
liquidity facilities for businesses impacted by COVID-19, and we appreciate your ongoing dedication to
ensuring that these facilities work as well as possible for small, medium-sized, and large manufacturers.
On behalf of the NAM and the 13 million men and women who make things in America, thank you for
your attention to these concerns.
Sincerely,
Chris Netram
Vice President, Tax and Domestic Economic Policy
cc: The Honorable Steven Mnuchin
The Honorable Mike Crapo
The Honorable Sherrod Brown
The Honorable Maxine Waters
The Honorable Patrick McHenry
4
April 22, 2020
VIA ELECTRONIC SUBMISSION - regs.comments@federalreserve.gov
The Honorable Steven T. Mnuchin The Honorable Jerome H. Powell
Secretary Chair
Department of the Treasury Board of Governors of the Federal Reserve
1500 Pennsylvania Avenue, NW System
Washington, D.C. 20220 20th Street and Constitution Ave NW
Washington, DC 20551
Re: Concerns Regarding the Main Street Lending Program: Main Street New Loan Facility
(MSNLF) and Main Street Expanded Loan Facility (MSELF)
Dear Sirs:
The Real Estate Roundtable 1 (RER) and Nareit2 represent the owners, investors, managers and
other stakeholders in the $16 trillion U.S. commercial real estate (CRE) sector, which includes a
broad range multifamily, lodging, office, industrial, retail and healthcare properties. U.S.
commercial and multifamily real estate is supported by over $4 trillion in debt – mostly provided
by commercial banks, life companies, government sponsored enterprises and commercial
mortgage backed securities (CMBS). We appreciate the opportunity to comment on the April 9
term sheets for the Main Street New Loan Facility (MSNLF) and Main Street Expanded Loan
Facility (MSELF; together the Programs).
Both of our organizations are grateful for your collective efforts to support the U.S. economy
during the economic crisis resulting from the COVID-19 pandemic. We are particularly
encouraged by the Federal Reserve and Treasury’s timely decision to revive the Term Asset
Backed Securities Facility (TALF), the Federal Reserve Bank of New York’s (FRBNY) initiation
of purchase of agency CMBS3, and we appreciate the recent announcement4 that the Federal
Reserve will broaden the range of TALF eligible collateral to include the triple-A rated tranches
of both outstanding (legacy) CMBS, commercial mortgage loans and newly issued collateralized
loan obligations.
1
The Real Estate Roundtable (www.RER.org) brings together leaders of the nation’s top publicly-held and privately-
owned real estate ownership, development, lending and management firms with the leaders of major national real
estate trade associations to jointly address key national policy issues relating to real estate and the overall economy.
2
Nareit (www.Nareit.com) serves as the worldwide representative voice for real estate investment trusts (REITs) and
real estate companies with an interest in U.S. income-producing real estate. Nareit’s members are REITs and other
real estate companies throughout the world that own, operate, and finance income-producing real estate, as well as
those firms and individuals who advise, study, and service those businesses.
3
“Statement Regarding Treasury Securities and Agency Mortgage-Backed Securities Operations,” Federal Reserve
Bank of New York (Mar. 23, 2020), available at:
https://www.newyorkfed.org/markets/opolicy/operating policy 200323.
4
“Federal Reserve takes additional actions to provide up to $2.3 trillion in loans to support the economy”, Federal
Reserve (April 9, 2020), available at:
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200409a.htm
We previously wrote to you on March 24 and April 14, urging greater support for Agency and
private label, non-agency CMBS and related CRE lending products. We then noted that it was
already apparent that the damage to the commercial real estate sector will be both broader and
deeper than it was during the 2008 crisis.
Unfortunately, in the intervening days, conditions in the commercial real estate sector have
deteriorated further, providing us with a more detailed understanding of the nature and scope of
the problem. Survey data with regard to April rents is currently being compiled, but the early
data is discouraging. Initial survey data estimates that fewer than 50% of shopping center rents
may have been paid. In the residential sector, estimates of unpaid rent range from the six to
14%. These numbers are likely to increase because the CARES Act permits financially stressed
tenants in properties financed by federally backed loans to postpone rent payments and several
states and municipalities are currently considering additional measures to afford tenants rent
forbearance.
Total commercial real estate rents collected in 2019 are estimated to be in excess of $1.8
trillion. These rents are collected from properties across a range of sectors including office,
industrial, retail, multifamily, hotels, heath care, self-storage and newer sectors that include data
centers and cell phone towers. U.S. rental revenues are equivalent to 9% of GDP, but are rarely
recognized because they are an input rather than a final good. Rent supports the payment of
expenses such as salaries, property taxes, utilities, insurance and maintenance, principal and
interest expense to banks and bondholders, and only then dividends and distributions to
investors.
So, with revenue in commercial and multifamily real estate markets diminishing, real estate
credit and capital markets are stalled. Borrowers, owners, managers are facing existential
challenges. At a time when Main Street needs credit, it cannot get it because the secondary
markets that provide liquidity to Main Street lenders are clogged.
We are encouraged by the steps taken by the Treasury and the Federal Reserve thus far, but
more must be done. It is important for the Main Street Lending Program to work effectively and
support commercial real estate.
Suggestions to Enable CRE Borrowers to Access the Programs
The Federal Reserve established the Main Street Lending Program to enhance support for
small and mid-sized businesses across the U.S. economy that are in good financial standing
before the crisis. Notwithstanding the significance of commercial real estate to the U.S.
economy, it will be difficult, if not impossible, for many commercial real estate companies to
access the Main Street Lending Program if certain changes, set forth below, are not made to
offer more realistic flexibility to the Program.
The Honorable Steven T. Mnuchin
The Honorable Jerome H. Powell
April 22, 2020
Page 2
1. Underwriting/Leverage Limitations/Loan Size.
As a general matter, we recommend that the banks underwriting these Main Street loans be
granted greater discretion in assessing credit worthiness across industries and with respect to
individual borrower circumstances. In addition to considering industry-specific factors, lenders
should be able to take account of existing covenants, funding terms and utilize pre-existing
metrics in the credit agreements for calculating the leverage limitations applicable to borrowings
from the MSNLF and the MSELF.
Our CRE members are particularly concerned that the “one-size-fits-all-industries” leverage
limits set forth in the MSNLF and MSELF term sheets will not work for most U.S. CRE
companies, which typically operate at higher leverage levels than other industries. The highly
specific Debt/EBITDA metrics of 4x (New Loan) and 6x (Expanded Loan) would significantly
limit the number of CRE companies who can access the Main Street Lending
Programs. Lenders should be given discretion to use CRE-specific leverage limitations based
on loan-to-value or a substantially higher EBITDA threshold to address the conventions of CRE
practices.
2. Distributions.
REITs and certain other pass-through entities are required by law to annually distribute their
taxable income to shareholders. The application of the dividend-related restriction to REITs
would not be consistent with the longstanding federal interest of supporting REIT-based real
estate investment. For this reason, it would appear that the absence of an exception for REITs
is an oversight stemming from the emergency nature of the CARES Act. We suggest that the
Programs allow for limited exceptions to the CARES Act distribution prohibitions for borrowers,
like REITs, which are required by law to make distributions to maintain their legal status.
Similarly, any extension of the restriction to distributions by S corporations or partnerships would
undermine the critical purposes served by the lending facilities.
3. Loan Terms.
The Programs loan terms, as proposed, will be too short to accommodate CRE borrowers in
many cases. CRE loans tend to be longer-dated than lending facilities for operating businesses.
We suggest that the Programs permit lenders and borrowers to agree to terms of at least six
years, and permit borrower and its lenders to agree to amortization schedules consistent with
existing their circumstances and existing borrowings.
4. Applicable Interest Rate Index.
The great majority of CRE borrowers currently use LIBOR. With respect to more recent CRE
loans, provisions generally permit the agent to move to a replacement rate when LIBOR is no
longer published, or when an alternative rate (e.g., SOFR) is generally in use. We suggest that
the Programs implement a similar policy, consistent with current market practice, i.e., permit
The Honorable Steven T. Mnuchin
The Honorable Jerome H. Powell
April 22, 2020
Page 3
borrowers to initially use LIBOR with “fallback” provisions for transitioning to SOFR consistent
with either of the ARRC’s approved options.
5. Program Timing.
Given the complexity of CRE capital structures and loans, the ability to complete transactions
that benefit these properties may take longer than September 30, 2020. We suggest that the
Program’s facility termination date be extended to December 31, 2020.
***
We appreciate the opportunity to provide commentary on the Main Street Lending Programs,
and the importance enabling the Programs to provide credit support for the commercial real
estate sector. We respectfully urge that these additional measures be adopted to expand the
scope of the Main Street Lending Programs to forestall further disruption and economic
dislocations in the commercial real estate sector.
Should you have any questions or desire any clarification concerning the matters addressed in
this letter, please do not hesitate to contact Clifton E. Rodgers, Jr. (crodgers@rer.org) or
Victoria Rostow (vrostow@nareit.com).
Sincerely,
Steven A. Wechsler
President & CEO
Nareit
Jeffrey D. DeBoer
President & CEO
The Real Estate Roundtable
The Honorable Steven T. Mnuchin
The Honorable Jerome H. Powell
April 22, 2020
Page 4
NRF.
THE VOICE OF RETAIL
April 16, 2020
BY ELECTRONIC MAIL
The Honorable Jerome Powell The Honorable Steven Mnuchin
Chairperson, Board of Governors Secretary of the Treasury
Federal Reserve System United States Department of the Treasury
Eccles Federal Reserve Board Building 1500 Pennsylvania Avenue, NW
Washington, DC 20551 Washington, DC 20220
Dear Chairman Powell and Secretary Mnuchin:
Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs. As the
Federal Reserve cited in its Beige Book report issued yesterday, the retail industry has been especially
hard hit by social distancing measures and mandated closures.
The National Retail Federation (NRF) is the world’s largest retail trade association, representing
discount and department stores, home goods and specialty stores, Main Street merchants, grocers,
wholesalers, chain restaurants, and internet retailers in the United States. As the American public stays
home due to voluntary and mandatory social distancing, the retail industry pays the price along with the
tens of millions of Americans who work in stores and restaurants. Labor and benefit obligations, vendor
payments, rents, and loan payments are all crippling burdens without sales revenue. Our members are
suffering cumulative losses that amount to tens of billions of dollars each week, and many parts of the
retail sector have seen revenues shrink by 90-100% compared to the same period last year.
The NRF urges you to take steps now to ensure that our nation’s largest retailers can rely on the
same economic support programs that have been made available to America’s small businesses and
largest corporations. Prompt access to financial relief should be available to hard-hit businesses of all
sizes. If appropriate attention is not paid to the financial needs of this important sector, the disruptions of
the pandemic on retailers and their workers may have adverse long-term consequences on the larger
economy.
The Federal Reserve and the Treasury Department possess broad discretion with these programs,
including the Main Street Lending Program and the Primary Market Corporate Credit Facility
(“PMCCF”)—the two programs in which our members have expressed the most interest. We are
concerned that, while helpful to some, the Main Street Lending Program and PMCCF eligibility
requirements are so limiting that many critical businesses in need of financial assistance will not qualify
for relief. Expanding the eligibility criteria for these programs will provide much needed support to some
of America’s most recognizable brands and, most importantly, their workers who have been severely
impacted by the pandemic.
NATIONAL RETAIL FEDERATION
1101 New York Avenue, NW, Suite 1200
Washington, DC 20005
www.nrf.com
National Retail Federation
April 16, 2020
Page | 2
At the outset, we note that getting access to these facilities as quickly as possible is of paramount
concern to our members. Retailers want to know how quickly they can be accessed and have multiple
questions about how they will work. An overarching concern shared by thousands of our members across
the country is that, when their May rents come due, a domino effect of defaults and foreclosures could
upend the commercial mortgage market, many community banks, and state and local tax bases. Getting
cash to our members as quickly as possible will provide a financial tourniquet that entire communities
need to survive.
In assessing the programs announced to date, it seems clear that the Federal Reserve and Treasury
Department have made a qualitative judgment that mid-sized companies can be served by allowing the
relief at the top and bottom ends of the market to trickle “down the credit stack.” This strategy may work
in theory, but our members report that they are not seeing strong signs that the markets serving their
liquidity needs are loosening. Moreover, the absence of a direct lending option or a clearly defined
facility serving these firms sends the unfortunate signal that help is not likely to be forthcoming from the
Title IV CARES Act programs, and these firms must take more drastic steps to relieve the economic
pressure.
We strongly encourage the Treasury and Reserve to consider the unintended consequences of
some of the proscriptive requirements attached to the lending facilities and how they may impact retailers
of all sizes. In cases where the eligibility criteria are too narrow for American retailers, we ask that your
respective agencies exercise discretion to make these programs more widely available.
Greater flexibility in eligibility criteria means that more businesses can access the financial
assistance they need. For example, many retail companies will not qualify for the Main Street Lending
Program as designed because they employ more than 10,000 individuals. Other retailers earned more
than $2.5 billion in revenue in 2019 (though some of those will not in 2020). Based on public data, nearly
200 non-investment grade borrowers that do not qualify for access to the PMCCF or other Federal
Reserve programs do not currently meet the 10,000 employee/$2.5bn revenue criteria as contained in the
MSNLF and MSELF term sheets. As written, the Main Street Lending Program is out of reach for these
businesses, despite their need.
Specifically, the Main Street Lending Program’s EBITDA requirements add an additional hurdle
to a business’s ability to access assistance through the Main Street Lending Program. We respectfully
request that the Federal Reserve confirm that the EBITDA calculation excludes the untapped portion of
any revolving debt facility, which would otherwise artificially constrain loan amounts.
In addition, the blunt EBITDA ratio requirements in the maximum loan amount calculations do
not account for one-time revenue hits, which could result in the exclusion of struggling businesses that
would be otherwise eligible. We urge you to consider an accommodation for borrowers who face this
type of situation.
We would also like to observe that limiting the definition of Eligible Loan under the Main Street
Expanded Loan Facility to a "term loan" may be inconsistent with the kinds of committed revolving loan
facilities common in retail. Simply expanding the definition to include a revolving loan facility in
addition to a term loan is appropriate as the ability of an otherwise Eligible Borrower to access the Main
Street Expanded Loan Facility should not be dependent on the nature of such Eligible Borrower's existing
credit facility, so long as such credit facility is provided by one or more Eligible Lenders. In fact, the
term sheet otherwise seems to account for a committed revolving loan facility since the definition of
Maximum Loan Size refers to an Eligible Borrower's existing outstanding and committed
but undrawn debt.
National Retail Federation
April 16, 2020
Page | 3
As you consider expanding the Main Street Lending Program, please also consider using your
discretion to ensure that the PMCCF is available to companies that were healthy before the covid-19
outbreak, even if they had low revenue margins (as most retailers do) before March 2020, some leverage,
and were below investment grade. Under the PMCCF, flexible and lower investment grade ratings that
account for companies with split credit ratings would expand the range of eligible participants. Only
allowing investment grade companies to participate automatically excludes certain specialty retailers
whose size and sales are below the rating agencies’ size threshold. As a result, the PMCCF is off limits
for some businesses with strong pre-pandemic business models.
In general, with all of these programs, expanded credit criteria, longer loan durations, and higher
loan amount limits would ensure long-term success for borrowers, and our economy. At the end of the
day, regardless of the specific technical solution, our retailers need access to economic support, and they
need access now. These companies are looking for a way to keep their employees on the payroll and
provide the goods and services that their customers enjoy.
In closing, I thank you for your extraordinary leadership and public service at this unprecedented
time. The NRF’s members support the swift efforts of your institutions, the Trump Administration and
Congressional leadership to address the public health and economic challenges our country faces.
Sincerely,
VDavid French
Senior Vice President
Government Relations
cc: Members of the Board of Governors of the Federal Reserve System
National Association of The<1tre Owners
The Honorable Steven T. Mnuchin
Secretary of the Treasury
U.S. Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, D.C. 20220
The Honorable Jerome H. Powell
Chainnan
Board of Governors of the Federal Reserve
20th Street and Constitution Avenue NW
Washington, D.C. 20551
Dear Secretary Mnuchin and Chai1man Powe1l:
The ational Association of Theatre Owners ("NA TO") respectfully submits these
comments to The Board of Governors of the Federal Reserve System (the "Fed") and the
Depruiment of the Treasury (the "Treasury") regarding the terms of the Main Street New
Loan Facility and Main Street Expanded Loan Facility (together "MSLFs") announced
on April 9, 2020. These loans, as a supplement to the other loan vehicles described in the
CARES Act must be modified significantly in order to be useful in addressing the
economic realities of severely distressed sectors of the economy such as movie theaters
that have been forced to close in the interest of public health directives. A loan that
merely adds debt to companies in these sectors will not further your stated goal of
helping to "ensure that the eventual recovery is as vigorous as possible." 1
We ask that you ensure our nation's beloved motion picture exhibition industry 2 is
eligible for lending facilities and loan guarantee programs established in coordination
1 Board of Governors of the Federal Reserve System, Federal Reserve takes additional actions to provide
up to $2.3 trillion in loans to support the economy (April 9, 2020),
https://www.federalreserve.gov/oewseveots/pressreleases/mooetary20200409a.htm
2 See e.g., Matt Singer, The 15 Things We Miss Most About Movie Theaters, SCREEN CRUSH (Apr. 13,
2020) https://screeocmsh.com/thiogs-we-miss-about-movie-theaters/; Owen Gleibermao, Why I Miss Movie
Theaters, and Why Nothing Can Replace Them, VAR lETY (Apr. 13, 2020)
https ://variety.com/2020/fi lm/columns/why-i-miss-movic-theaters-1234577997/; David lu·I ich, Movie
Theaters Are Closed, but 'f1ieir Value lsn 't Lost to Us Yet, INDIEWIRE (Mar. 22, 2020).
between the Depa1tment of the Treasury and the Federal Reserve under Section 4003 of
the CARES Act including the MSLFs. These lending facilities and programs will be
crncial to the survival of the theater industry, a sector severely distressed by the COVID-
19 public health crisis.
NATO is the largest motion picture exhibition trade organization in the world,
representi ng more than 33,000 movie screens in all 50 states, employing over 150,000
people in the United States. Our membership includes the largest cinema chains in the
world along with hundreds of small family-operated independent theaters. NATO and its
members have a significant interest in preserving moviegoing in the United States, which
is the biggest film- going market in the world, accounting for roughly 30% of global
revenue from only 5% of the global population.
We respectfully suggest the following modifications to any loan vehicle under the
CARES Act in order to e nsure a full economic recovery for shuttered industries such a
movie theaters post-pandemic:
1. Immediate Need for Lending Vehicles to Address Companies of All Sizes
2. Need Option for Broad Forgiveness of Fixed Costs
3. Eliminate Employee Retention Requirements for Shuttered Industries
4. Need Flexibility on Acceptable Uses of Loan Proceeds to Address Industry
Specific Costs
5. Waive Solvency Requirements for Shuttered Industries
6. Need Reasonable Loan Terms that Will Allow Industries to Succeed Post-
Pandemic
7. Loan Caps Should be Increased to Address Possible Delay in Recovery
8. Loan Vehicles Should not be Mutually-Exclusive
9. Expand Lending Eligibility to Non-Bank Lenders
Key issues in the MSLFs continue the significant gaps in the CARES Act response to
severely distressed industries. The CARES Act provided much needed relief to our
150,000 furloughed employees through direct payments and substantially e nhanced
2
unemployment benefits. That landmark legislation also addressed some of the liquidity
challenges experienced by the theater companies themselves, but many key loan vehicles
remain underfunded or awaiting formal enactment. Given the fact that movie theaters are
completely shuttered, and have no work for their employees to do, loan programs must
contain specific provisions to enable cinemas to survive this clisis, and have jobs for their
employees when the crisis is over. The failure of movie theaters to survive this crisis will
have significant negative consequences beyond the theaters themselves. Other businesses
and indusnies depend on the success of movie theaters. Theaters are desirable and stable
anchor tenants that boost foot traffic to nearby retailers, providing a lift to neighboring
businesses and dependent industries. 3 The creative community, which employs some 2.5
million people around the country, depends on a healthy and thriving theatrical market.
Theaters are closely tied to their communities 'economic success, and we were among the
earliest businesses to close to support public health effo1ts. Without appropliate lending
facilities, we may be among the last to fully recover.
NECESSARY LOAN PARAMETERS FOR SHUTTERED INDUSTRIES
1. Immediate Need for Lending Vehicles to Address Companies of All Sizes
As an initial matter, the MSLFs fail to address the needs of the exhibition market in its
size, scope and terms. The ongoing viability of the industry depends on assistance that
reflects the needs of the indusn·y holistically. The success of the exhibition indusn·y as a
whole is dependent on the success of movie theaters of all sizes across the country
meeting the unique demands of their communities. This network of individual exhibition
companies fo1m a wide theatrical footprint that film distribution companies rely on to
shape their release patterns. Exhibitors depend on consistent product and distributors
depend on this diverse footprint. The loan options under the CARES Act need to address
each of the elements of this interconnected ecosystem that is central to American cultural
life. While the effo1ts to assist small employers through the SBA and some small and
3Interoational Council of Shopping Ceuters, Expanding Entertainment Tenants Add
Experiences to Shopping Centers, (Sept. 5, 2019) https://www.icsc.com/up1oads/t07-
subpage/Entertainment Part rr Industry Sector Series.pdf (Movie theaters are key tenants in retail space
helping drive consumer traffic and provide a lift to surrounding businesses).
3
mid-sized employers through the MSLFs is appreciated, there needs to be an immediate
effo1t to provide necessary liquidity to movie theater companies of all sizes including: (1)
small companies with fewer than 500 employers; (2) mid-sized companies with up to
10,000 employees; and (3) larger companies that employ more than 10,000 people.
Ensuring a wide infrastrncture of theaters after this pandemic is clitical to continued
studio releases of all sizes, the success of smTounding retail establishments and related
industries, and the enduring success of the Amelican moviegoing culture.
2. Need Option for Broad Forgiveness of Fixed Costs
As an initial matter, we understand that expanding forgiveness will take an act of
Congress. That said, broad forgiveness should be included in all loan options for
shuttered industries. Movie theaters are among a handful of industries that depend on
social gathering for their ongoing success. Companies in these severely distressed sectors
have been the hardest-hit by the COVID-19 pandemic as they were among the very first
to shut down and will be among the last to be back to full capacity as we await for
reopening plans across the country, many of which anticipate social distancing
requirements for several months or longer. 4 Cu1Tently, over 99% of the movie theaters
across the country are completely shuttered through no fault of their own.
Currently, only the Paycheck Protection Plan ("PPP") offers any forgiveness at all, and
even this modest forgiveness does not allow for benefit toward the fixed costs movie
theaters must continue to pay even while shut down in compliance with government
orders. Loans intended to help these most impacted sectors should come with meaningful
forgiveness tied to the economic realities of the companies as do their pa1t to protect the
American public and comply with government mandates.
4Adam B. Vary, New Federal Coronavirus Guidelines Specify When Movie Theaters Could Reopen,
VARIETY (Apr. 16, 2020) https://variet y.com/2020/film/news/coronavirus-guidelines-reopen-movie
theaters-1234582617 / (movie theaters will be subjec t to social distancing requirements upon reopening);
see also Heather Long, Here's What Reopening the Economy is Likely to Look Like: More Masks, Fewer
Workers, High Unease, THE W ASHCNGTON POST (Apr. 14, 2020)
https://www.wasbi.ngtonpost.com/business/2020/04/14/economy-reopenings/ ("Opening up the economy is
likely to happen in waves. Some sectors such as construction and manufactu1ing are likely to restart faster
than restaurants, hair salons and concerts that involve more human contact and will need time to sort out
safety measures . For months to come, business efficiency will be sacrificed by putting in pl ace necessary
health measures.")
4
In order to avoid adding on more debt without a meaningful roadmap to reopening,
government loan programs should acknowledge the costs to businesses of these
prolonged closures. Fixed costs such as rent and utilities should be forgiven in full while
the business is shut down and then proportionally forgiven as businesses are allowed to
begin reopening, so that a business that is allowed to reopen only at a 50% capacity may
have 50% of its eligible fixed costs forgiven.
Allowing all eligible fixed costs to be completely forgiven for distressed industries during
a government-mandated shutdown is an equitable means to ensure these vital employers
and cultural centers across the country are able to return to full operational capacity once
it is safe to do so.
3. Eliminate Employee Retention Requirements for Shuttered Industries
Loan e]i.gibility or forgiveness under the CARES Act should not be tied to employee
retention for shuttered industiies. The MSLFs contain a mandate that an eligible borrower
"will make reasonable efforts to maintain its payroll and retain its employees during the
te1m of the Eligible Loan." A similar restriction is linked to the Mid-Size business loans
in Section 4003(c)(3)(D)(i). The PPP loans also contain a requirement for 75% of the
loan to go toward payroll.
These retention requirements have largely drained the utility of any loan for businesses
that have suspended their operations due to government shutdown s. Especially given the
generous pandemic unemployment supplement offered by the federal government,
requiring businesses that have no work to offer employees to retain workers means that
we are not able to divert the desperately needed liquidity to mounting fixed costs such as
rent, mortgages, existing debt, and accounts payable. Fuither, health care mandates and
product supply may mean that theaters may not reopen until after other businesses are
able to go back to normal operating status 5. Given our longer recovery needs, tying
5 Jason Guerassio, Movie 'I'liealers are Desperately T,ying to Reopen. When it Happens, You Won't be
Sitting Near Anyone for a While , INSIDER (April 16, 2020) https ://www.insider.com/when-wi ll-movie
theaters-reopen-masks-social-distancing-2020-4 (On product delay: "The corona virus pandemic has caused
many studios and distributors to drastically change their release slates." On health code delay: "All sources
5
eligibility for much -needed liquidity to employee retention could prevent severely
distressed industties from recovering, and would therefore have the unintended
consequence of prioritizing employment in the short-term at the risk of the long-term
economic health and employment capacity of these industrie..
4. Need Flexibility on Acceptable Uses of Loan Proceeds to Address Industry
Specific Costs
Loan vehicles must aJlow for flexible distribution of the Joan ' s qualifying uses, with no
minimums on the percentage dedicated to payroll or other expenses. With loans from the
PPP to the MSLFs requiring a pledge to dive1t proceeds to payroll, borrowers are not able
to dive1t the desperately needed liquidity to mounting fixed costs such as rent, mo1tgages,
existing debt, and accounts payable. Exhibitors are eager to get back to pre-pandemic
employment numbers and coITesponding business levels, but must first get through this
peri.od of continued fixed costs with zero income. Many of ur employees are protected by
the generous unemployment provision s in the CARES Act; we ask that you expand your
focu s-pruticularly for shuttered indu stries-on funding fixed costs that are not
otherwise addressed by the CARES Act. This flexibility is key to ensuring a "swift
recovery once the disruptions abate." 6
5. Waive Solvency Requirements for Shuttered Industries
Solvency requirements and the application of credit ratings should not apply to
businesses in distressed sectors that ru·e shut down due to the global pandemic. For
example, because the CARES Act (Section 4003 (c)(3)(C)) applies all applicable
requirements of section 13(3) of the Federal Reserve Act to CARES Act section 4003(c)
loans, the solvency requirements contained in 12 C.F.R. § 201.4(d)(5)(iii)(B) 7 may
agree lhat their plans will need lo be based on lhe CDC's recommendations, any mandates by governors and
mayors, and evidence that the rale of new coronavirus cases has flattened. ").
6 Board of Governors of the Federal Reserve Syslem, Federal Reserve takes additional actions to provide
up to $2.3 trillion in loans to support the economy (April 9, 2020),
https ://www.federalreserve .gov/newsevents/pressreleases/monetary20200409a.htm
7 An entity is "insolvent" if it meets one of three lests, including thal lhe "entity is generally not paying ils
uudispuled debls as they become due during the 90 days preceding lhe date of borrowing under lhe
program or facility" .
6
prevent closed consumer facing businesses from qualifying for a lending facility.
Clearly, companies that have been ordered closed by state governments and have no
income may not be able to overcome the strict definition of "insolvency" in regulations
not meant to address the need to stabilize a pandemic induced economic shutdown.
In the alternate, Treasury and the Federal Reserve should adopt a broad approach to the
Federal Reserve Act's definition of insolvency and to the application of credit ratings,
ensuring that businesses that have struggled to pay down existing debt and accounts
payable since the declaration of a national emergency have access to liquidity.
Backdating the solvency detennination to the date of the pandemic declaration is
consistent with the intent of both the Dodd-Frank Act and the CARES Act, which both
attempt to distinguish companies that caused an economic crisis through bad acts from
those that were harmed directly by government orders to shut down. 8
8 Senator McConnell in particular was clear that the loan relief was intended to assist businesses in those
sectors that were forced to slow down or shut down entirely in order to slow the spread of the pandemic. It
is these cases where the type of the business itself made it particularly vulnerable to social distancing
measures or full shutdowns that this section is meant to protect. As Senator McConnell described it:
We are not talking about so-called bailouts for firms that made reckless decisions. Nobody
is alleging a moral hazard here. None of these firms-not corner stores, not pizza parlors,
not airlines-brought this on themse lves. We are not talking about a taxpayer-funded
cushion to companies that made mistakes. We are talking about loans, which must be
repaid, l'or American employers whom the government itsell'-the government itsell'
is temporarily crushing l'or the sake ol' public health.
Mitch McConnell (KY). "Senate Legislative Agenda." Congressional Record Vol. 166, No. 53 (March 19,
2020) p. S1818. (Text from: Congressional Record Permanent Digital Collection); Accessed: April 15,
2020. hllps://www.congress.gov/116/crec/2020/03/19/CREC-2020-03-19-pt1 -PgS1817-8.pdf (emphasis
added).
In contrast, during the enactment of Dodd-Frank, Senator Dodd claiified the intent behind the solvency
requirement was to ban bad actors from profiting off of their misdeeds:
The Federal Reserve can only use its 13(3) emergency lending authority to help solvent
companies. Regulators can ban culpable management and directors of failed firms fro m
working in the financial sector. That is an add-on. It makes sense that if someone has been
involved in the mismanagement of a company and caused this kind ol' disruption in the
economy, then it requires that they would be banned from engaging in fmther economic
activities. With this agreement, there can be no doubt that the Senate is unified in its
commitment to end taxpayer-funded bailouts.
Cluis Dodd (CT). "Resto1ing American Financial Stability Act of 2010." Congressional Record Vol. 156,
No. 66 (May 5, 2010) p. S3131. (Text from: Congressional Record Permanent Digital Collection);
Accessed : April 15, 2020.hllps://www.congress.gov/111/crec/2010/05/05/CR -C-2010-05-05.pdf
(emphasis added) .
7
6. Need Reasonable Loan Terms that Will Allow Industries to Succeed Post
Pandemic
Loan terms to distressed sectors should contain terms that will promote recovery, not
saddle these businesses with debts that will delay or prevent reopening. At a minimum,
all loans to distressed sectors should adopt the following parameters:
a. Interest Rate Should be No More Than 2%
b. All Loans Should Include 1 Year Deferral on Principal and Interest
c. Loan Maturity Period Should Exceed 10 Years Following 1-Year
Deferral
d. Loan Should Have No Fees or Limited Fees
Given uncertainty about how quickly theaters and other similarly distressed industries
will be able to reopen, loan terms should reflect the difficulty in incuning additional debt,
and should reflect the intention to ensure these industries are able to return post
pandemic, rather than an attempt to profit off of their necessary shutdowns.
7. Loan Caps and Application Deadlines Should be Increased to Address
Possible Delay in Recovery
Loan caps and application deadlines should reflect a possible delay in recovery,
particularly for shuttered industries. Cull'ently, none of the loan vehicles adequately
address the liquidity needs of severely distressed industries that may have longer
recovery periods than other sectors. For example, the PPP loans offer a cap of 2.5 months
of average 2019 payroll, along with restrictive payroll requirements. Further the MSLFs
EBITDA calculation could leave many industries without necessary funding to get
through a potentially months-long shutdown and likely slow reopening.
8
a. Loans Should be Calculated at 8x all Monthly Fixed Costs
Loans for shuttered industdes should increase a cap to 8x the average monthly cost of all
qualified uses of the loan expenses, not just payroll, which will allow the loan to go
fmther and cover a longer- than-expected closure and recovery period.
b. Reconsider Use of EBITDA; If Used Definition Should Allow for
Flexibility and With Increased Multiple
The MSLFs reliance on EBITDA to determine funding cap is prohibitive to many
exhibitors and will unintentionally exclude these key businesses from the recovery
funding measures. For example, many exhibitors have been expanding or investing in
major improvements in recent years to add recliners or exciting new technologies. For
many of these exhibitors, they have taken on new debt for remodeled or improved
prope1ties, but may have only been able to open those properties to the public for a few
months leaving them off the EBITDA calculations. Fmther, because some of these
prope1i ies were closed paitially or entirely in 2019 this significantly impacts the EBITDA
for 2019. This leaves these populai· and growing companies with very little oppo1tunity to
access liquidity via the MSLFs as their EBITDA less debt is $0 or potentially negative.
In order to address these concerns, the MSLF cap should allow for different measures for
loan cap other than just EBITDA. In the alternative, a flexible approach to EBITDA
using an average over a period of years or a theater-level/unit cash flow metric rather
than an overall/corporate calculation could better reflect the needs and reality of these
companies. When using a flexible EBITDA definition to detennine the loan cap, a
multiple of 6-8x is more approp1iate, pa1ticulai·ly for industlies such as exhibition that
operate with low margins and high fixed costs.
8. Loan Vehicles Should not be Mutually-Exclusive
While many small business theaters may be temporarily assisted with Small Business
Administration loans, given the revised parameters of the loan programs and the
unce1tainty around reopening, we are concerned that the loans simply will not extend far
9
enough to cover the anticipated closure pe1iod. As such, we ask that all businesses that
have akeady received loans through the CARES Act are also eligible for additional
assistance from Treasury or Fed vehicles. In addition, many companies may have had to
establish or draw down expensive debt to bridge the short-tenn delay in federal funding.
These debts, which were incmTed as a direct result of the pandemic, should be able to be
refinanced into any new loan vehicle under the CARES Act. Finally, we would ask that
loan programs, such as the two MSLF vehicles not be made mutually exclusive as this
will unnecessarily deny access to liquidity from othe1wise qualified boITowers.
9. Expand Lending Eligibility to Non-Bank Lenders
Finally, in order to diversify the oppo1tunities for investment, the lending pool should be
broadened to include non-bank lenders such as private equity fnms. As we have already
seen with the PPP loans, eligible lenders are hitting their funding caps quickly, creating a
significant backlog in applications and delays in needed funding. 9 By expanding eligible
lenders, this will allow businesses to work with trusted lenders that understand their
business and will also help reduce the burden on banks.
CONCLUSION
Movie theaters will survive in the long te1m if they can survive in the sho1t term. The
loan programs and lending facilities overseen by the Depa1iment of the Treasury and the
Federal Reserve will be crncial to theater resiliency during this difficul t period. We
applaud your dedicated staff on the extraordinary steps taken in recent weeks to facilitate
the recovery and reopening of the American economy. With the above parameters in
mind, these loan programs will ensure that our theaters can bring the magic of the movies
to communities for years to come.
9 Aaron Gregg, Jeanne Whalen and Erica Werner, Small-business program intended for quick grants is
running weeks behind, THE WASHINGTON POST (Apri l 15, 2020);
hllps://www. washingtonpos t .com/busi ness/2020/04/15/another-sba-program-is- eve re Iy-backlogged
running-low- f1.1 nds/.
We appreciate your attention to these comments.
Sincerely,
John Fithian Jackie Brenneman Esther Baruh
President and CEO General Counsel Director of
National Association of National Association of Government Relations
Theatre Owners Theatre Owners National Association of
1705 N Street, N.W. 3450 Cahuenga Blvd. W Theatre Owners
Washington, D.C. 20036 Unit 410 1705 N Street, N.W.
(202) 962-0054 Los Angeles, CA 90068 Washington, D.C. 20036
jf@natodc.com (818) 506-1778 (202) 962-0054
jeb@natoca.com erb@natodc.com
11
N ·A · W
April 16, 2020
Federal Reserve Board
20th Street and Constitution Avenue, N.W.
Washington, D.C. 20551
Dear Board Members:
There is a provision in the Main Street New and Expanded Loan Facility term sheets that requires a
borrower to calculate and deduct from its maximum loan the amount of its "committed but unclrawn
debt." While the apparent intent of this provision is to require a business to use its available debt/credit
before taking advantage of MSLP loans, the provision will have the unintended consequences of
making many companies ineligible for the MSLP program.
It is a common practice in the wholesale distribution industry for companies to use asset-based lending
as a form of secured borrowing to fund their inventory needs. In many cases a large portion of the
revolving credit- often 20-30 percent - is considered to be cushion by the banks and is only accessible
to the company with the addition of fees, penalties, restrictions or limitations on its operations.
Dominion control of bank accounts by the lenders is not uncommon when the company draws debt
below the bank-mandated cushion.
Realistically, the amount of "committed but undrawn debt" that should be used in calculating the
amount of requested loan under the MSLP should not include debt that is not actually available to the
borrower without untenable restrictions being imposed by the banks.
The wholesale distribution industry may be uniquely impacted by the "committed but undrawn debt"
restriction because use of that credit method is widely used to finance invento1y, and we would
therefore ask that you consider removing that condition in its entirety from the te1m sheets.
Absent that, we urge the Federal Reserve to consider modifying the Loan Facility Term sheets to allow
borrowers to calculate their loan amounts using only the amount of "committed but undrawn debt" that
is available to them without punitive bank responses.
We propose two modifications for your consideration:
Option 1:
• Substitute "available" for "committed" in item 5. (Both terms are universally understood te1ms in
asset-based lending, but they mean two very different things.)
-more-
N ATIONAL ASSOCIATION OF WHOLESALER-DISTRIBUTORS
1325 G Street N.W., Suite 1000, Washington, DC 20005 · 202-872-0885 · FAX: 202-785-0586 · www.naw.org
April 16, 2020
Page2
• Add the following clarifying language: "For purposes of determining t he eligible loan amount (or,
for purposes of this provision), an eligible borrower's existing outstmtding and availabte but
undrawn bank debt does not include any amount that, if drawn, would cause the Bonower to suffer
fees, penalties, restrictions, or limitations on its operations. Lease financing ob]igatio'ns are also
excluded."
Option 2:
• No change to the te1m committed in item 5.
• Add the following clarifying language: "For purposes of determining the eligible loan amount (or,
for purposes of this provision), an eligible borrower's existing outstanding and committed but
undrawn bank debt does not include any amount that is not cmTently available under the te1ms of
the facility, nor does it include any amount that, if drawn, would cause the Borrower to suffer fees,
penalties, restrictions, or limitations on its operations. Lease financing obligations are also
excluded."
Thank you for your consideration.
Sincerely,
' 5191fi?>,, = ..
Dirk Van Dongen Jade West
President & CEO Chief Government Relations Officer
America's Beer Distributors • www.nbwa.org
Craig A. Pu rser
President & CEO
April 16, 2020
The Honorable Steven Mnuchin The Honorable Jerome Powell
Secretary Chailman
U.S. Department of the Treasury Board of Governors of the Federal
1500 Pennsylvania Avenue, NW Reserve System
Washington, D.C. 20220 20th Street & Constitution Avenue, NW
Washington, D.C. 20551
Dear Secretary Mnuchin and Chairman Powell:
As the Department of Treasury and the Federal Reserve determjne guidance on the
implementation and eligibility requirements of the Main Street Lending Program (MSLP), I am
writing to raise an issue that will impact many ofthe nation's pass-through businesses,
including the majority of over 3,000 family-owned beer distribution businesses represented by
the National Beer Wholesalers Association (NBWA).
Federal guidance should include and allow for S corporation access to the MSLP loan program
during this difficult time. The inclusion of certain capital distribution limitations or restrictions
could prevent S corporations from participation in this much-needed loan program.
To address this concern, NBWA recommends clarifying capital distribution attestation
requirements for the loan program by addressing Section 4003(c)(3)(D)(i)(vii) of the CARES
Act with an exception for pass-through distributions that are made to finance taxes owed on
business income, in a manner similar to the following:
The Eligible Borrower must attest that it will follow compensation, stock repurchase, and
capital distribution restrictions that apply to direct loan programs under 4003(c)(3)(D)(i)(vii)
of the CARES Act. These restrictions do not apply to pass-through entities that make
distributions to pay taxes attributable to income earned by the eligible entity.
NBWA members are primarily structured as S corporations. Many do not qualify for the
Paycheck Protection Program because they have more than 500 employees. Beer distributors
service every state and congressional district and collectively employ millions of workers across
the country. Conecting this presumed unintended consequence for pass-throughs will help
National Beer Wholesalers Association 1101 King Street, Suite 600 • Alexandria, Virginia 22314 703-683-4300
ensure that these businesses - many of which are family-owned and family-operated - are
allowed to participate in the MSLP loan program.
Thank you for your attention to this matter.
Sincerely,
Craig Purser
President & CEO
April 15, 2020
Jerome Powell, Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, N.W.
Washington, D.C. 20551
Dear Chairman Powe11,
I write to ask that the Board of Governors consider including higher education
institutions as eligible applicants for the Main Street Lending Program, which is a core part
of the recently announced $2.3 trillion in loans to support the nation's economy. They are a
significant sector of our economy that provide impact and benefit in multi ple ways.
In New England, our public and independent postsecondary institutions comprise one of
the region's most precious resources and critical industries, the fourth largest in terms of
overall economic impact. They are the core economic engines of cities and towns across
the region, enro11ing more than 1 mi11ion students, employing more than 256,000 faculty
and staff and paying over $12.8 bi11ion a year in salaries-for an annual economic impact
of over $23 bi11ion. Moreover, their graduates are the primary source of ski11ed talent
consistently sought by employers in a1l industries. Their research and development are at
the core of innovation and the region's current and future competitiveness. Their
response to the pandemic has been rapid and significant- but they desperately require
additional economic resources.
Nationwide, according to the U.S. Department of Education, higher education in the
United States is a $364 billion-a- year industry with nearly 4 million employees. Many of
those employed at higher education institutions live in the communities in which they
are employed and where they pay taxes and support local businesses.
The $6.2 billion provided directly to postsecondary institutions under CARES for
COVID-related expenses is an important first step-but this represents only a small
percentage of actual institutional costs related to the pandemic. Consider that in New
England, the average expected disbursement of emergency relief funds to directly
support a 2-year public institution is $1.2 million; to a 4-year public institution, $2.3
million; and to an independent nonprofit institution, $878,000. These amounts under
CARES are simply not adequate to close financial gaps due to the costs of retaining
faculty and staff, reduced revenues due to tuition and fee refunds, anticipated state
appropriation cuts, reduced charitable contributions, investment losses and other
factors. Additional help is needed and quickly.
Public and non-profit independent postsecondary institutions need expanded access to
credit to stabilize their financial circumstances, which have been negatively impacted by
the pandemic. In our region, where many postsecondary institutions were already facing
financial sustainability challenges, a broad range of borrowing alternatives is needed.
Please include postsecondary institutions in Main Street Lending Program.
Thank you for considering this request and I look forward to your earliest response.
Sincerely,
Michael K. Thomas
President
cc: Eric Rosengren, President and Chief Executive Officer, Federal Reserve Bank of
Boston
NATIONAL
NttC MULTIFAMILY
HOUSING
COUNCIL
April 16, 2020
The Honorable Steven T. Mnuchin The Honorable Jerome H. Powell
Secretary Chair
U.S. Department ofthe Treasury Board of Governors of the Federal
1500 Pennsylvania Avenue, N.W Reserve System
Washington, D.C. 20220 20th Street and Constitution Ave, N.W.
Washington, D.C. 20551
Dear Sirs:
For more than 25 years, the National Multifamily Housing Council (NMHC) and the
National Apartment Association (NAA) have partnered to provide a single voice for
America's apartment industry. Our combined memberships are engaged in all aspects of
the apartment industry, including ownership, development, management and finance.
NMHC represents the principal officers of 1,500 firms that own, develop, manage and
finance apartments. As a federation of more than 160 state and local affiliates, NAA
encompasses over 73,000 members representing nearly 9 million apartment homes
globally. One-third of all Americans rent their housing and 40 million of them live in an
apartment home.
We commend you for the leadership in supporting businesses during the COVID-19 crisis.
As requested, in your announcement, we write to you to provide comments on the Main
Street Lending Program: 1vlain Street New Lending Facility (MSNLF) and Main Street
Expanded Loan Facility (MSELF) established on April 9. The scope of this program is
potentially very broad, and its impact on the United States economy could be substantial.
We are providing our initial observations but also stand ready to continue to work with
you to enhance the program to ensure its maximum effectiveness for the multifamily
industry.
Our comments concern:
o Ensuring MSNLF and MSELF Conforms to the Intent of the Coronavirus Aid,
Relief, and Economic Security (CARES) Act;
o Loan Underwriting;
o Loan Parameters; and
o Loan Use
Confor1ning Changes to CARES Act Intent
The intent of the Payroll Protection Program (PPP) enacted as part of the CARES Act is
to support small businesses impacted by COVID-19 and to assist those enterprises to
retain their employees. Eligible small businesses are provided relief from repayment of
PPP loans if certain conditions are met regarding the retention of employees. While the
MSNLF and MSELF facilities are also intended to support the needs of small and
medium-size businesses during the downturn, these programs, unfortunately, do not
Secretary Mnuchin
Chairman Powell
April 16, 2020
Page 2
offer similar relief offered under the PPP. Given that the goal of supporting businesses is
paramount, NMHA and NAA believe that the Federal Reserve should offer a similar
approach to repayment relief to the MSNLF and MSELF facilities as the Small Business
Administration provides for the PPP. Specifically, we recommend that the Federal
Reserve provide a loan forgiveness feature similar to that applicable to the PPP loans.
Specifically, The loans from the MSNLF and MSELF facilities could become fully or
partially forgivable if tied to specific business activities such as retaining employees and
meeting other operational and financial obligations. Rental housing providers are gravely
concerned about their ability to keep up with their financial responsibilities, which remain
unchanged as more jurisdictions adopt renter protections with limited relief for housing
providers. Owners and operators rely on rental income to pay employee payroll, mortgage
payments, taxes, insurance and, importantly, use these funds to maintain continuity of
essential services for apartment communities as many renters must shelter in place.
Loan Underwriting:
Underwriting Guidance
The Federal Reserve will rely on the banking system to underwrite and disburse funds
from the two loan facilities. While the term sheet provided in the Federal Reserve's
announcement describes certain loan provisions and qualifying parameters that
borrowers must meet to qualify, it falls short in providing details regarding the loan
underwriting process. As the expeditious disbursement of funds is critical for businesses
to continue operating, we request further guidance on the requirements that lending
institutions will need to follow to underwrite loan requests, as well as the specific
company financial information that borrowers will need to provide. Without further
specific guidance banks that will be underwriting and making the decisions to approve
loans, approvals and disbursements will be delayed, denying funds to businesses at a
critical time.
Loan Sizing
For the MSNLF, loan limits are based on the lesser of 1) $25,000,000 or 2) an amount
when added to outstanding debt plus committed but undrawn debt is no more than 4
times earnings before interest, taxes, depreciation and amortization (EBITDA). Loan
sizing using this methodology fails to account for business models that vary widely in their
net profitability and debt leverage such as firms in the multifamily business. Real estate
businesses often generate passive and/or non-cash expenses that reduce EBITDA,
thereby reducing the maximum loan amount available. This could result in a loan amount
that would fall short ofsupporting necessary business operations. Finally, loan limits may
be constrained by limiting the use of EBITDA for only 2019. If a company experienced a
one-time event in 2019 that reduced their EBITDA, they would have their borrowing
capacity reduced. The multifamily industry requests that the Federal Reserve consider
changing the underwriting to reflect the business nature of the multifamily business
which is a more leveraged business whereby EBITDA may not accurately reflect the
financing need of the business. Alternatively, but less desirable as an option, is to allow
Secretary Mnuchin
Chairman Powell
April 16, 2020
Page 3
the businesses the option to use an average of EBITDA between 2017 and 2019or provide
lenders underwriting flexibility to evaluate borrowers that may have experienced a drop
in their 2019 EBITDA due to an unusual circumstance unrelated to COVID-19 and that
would not have been likely to persist in 2020 in the absence of COVID-19.
Loan Parameters
Borrower Fees
NMHC and NAA request that borrowers be permitted to finance, in the loan proceeds, the
obligation to pay the lender a 1oobps origination fee based on the loan amount, and, at
the option ofthe lender, pay the origination fee the lender will pay to the Federal Reserve
based on the loan amount sold to the Federal Reserve. We also have the following
additional questions:
• While loan repayment is deferred for one year, does interest accrue during that
time?
• If a loan is fully repaid at the end ofthe deferral period is the payoff amount simply
the loan amount?
Interest Rate Determination
The interest rate for program loans ranges from SOFR+ 25obps to 4oobps, yet there is no
guidance offered to determine the specific spread the lender will charge. To make the
program easier to execute, we recommend selecting a single spread. In particular, we
recommend that the spread on the entire loan amount be split with the lender receiving
a fixed spread similar to what is proposed in the guidance with the caveat that the portion
ofthe loan purchased bythe Federal Reserve should accrue interest at a rate near or under
one percent. The blended interest rate on the loan would be at a level appropriate to
supporting businesses impacted by COVID-19.
Employee Retention
The facility term sheets require the borrower to attest that they "will mal<e reasonable
efforts to maintain its payroll and retain its employees during the term of the Eligible
Loan" yet it offers no detail on how this will be determined. We request guidance with
respect to how that requirement will be determined, monitored, assessed and enforced.
We believe specific guidance must be provided if this requirement is to be included in the
term sheet. See our recommendation, in the section titled Conforming Changes to
CARES Act Intent, on how to utilize employee retention as an evaluative tool.
Loan Uses
Payment on Higher Priority Debt
We note that loan proceeds cannot be used to repay other debt of equal or lower priority.
Additionally, while it appears permissible to repay principle of a debt of higher priority,
it is unclear if proceeds may be used to repay interest applicable to such debts. We request
Secretary Mnucbin
Cbainnan Powell
April 16, 2020
Page4
that guidance clarify that loan proceeds may be used to repay interest and principle
applicable to debt of higher priority.
Restricted Uses
The CARES Act imposes restrictions on the use of loan proceeds from the MSNLF and
MSELF facilities, including the ability to distribute dividends. We believe that restricting
dividend distributions over a four-year loan repayment period is overly restrictive.
Accordingly, we recommend that the Federal Resenre enable borrowers to distribute
dividends if certain financial metrics are met, such as those pertaining to liquidity levels
and financial performance. Further, REITs represent a critical provider of housing yet
are precluded from using this program due to the restriction on dividend distribution.
We request providing a waiver to enable REITS to participate in the program given that
they are statutorily required to distribute net earnings via dividends after satisfying all
financial obligations that include loan repayments.
Thank you for your attention to these matters. Please feel free to contact Cindy Chetti,
SVP of Government Affairs with any questions at 202-974-2328 or cchetti@nmhc.org if
our organizations can be helpful in addressing these or other matters further.
Sincerely,
Doug Bibby Bob Pinnegar
President President
National Multifamily Housing Council National Apartment Association
NONPROFIT A relentless,
collective
NEW YORK force for good.
Public Comments on behalf of Nonprofit New York Re: Main Street Lending Program
April 15, 2020
The Honorable Jerome H. Powell
Chair, Board of Governors of the Federal Reserve System
Dear Chairman Powell:
Nonprofit New York is an association of 1,500 nonprofit organizations in the New York City area that
works to strengthen and unite New York's nonprofit sector. We write to express our deep concern that
t he Federal Reserve's Main Street Loan Facilities plans will exclude nonprofits. Nonprofits w ith more
than 500 staff members are ineligible for t he CARES Act PPP/SBA 7(a) loan program.
Due to years of ch ronic under-funding, many nonprofit huma n service orga nizations in New York City
have merged or consolidated into organizations with well over 500 staff members. These nonprofits
operate with razor thin margins (averaging 1%), are shifting scopes of work as essential p roviders
during the pandemic, do not have meaningful endowments, and are in most need of emergency loa ns.
Many of the city's cultural institutions have experienced hundreds of thousands of dollars in lost
revenue, are being denied business int erruption insura nce coverage, and have had to lay off
significant staff or close. We expect ed nonprofits with more than 500 staff to be eligible for relief from
the CARES Act §4003(c)(3)(D). If the Main Street Loan program intends to fulfill this section of the
CARES Act, excluding nonprofits will be devastating for New Yorkers. The very nonprofits critical for
New York City's survival through and afterCOVID-19 will not make it to mid-May. Our state is facing a
$15 billion deficit and our city $6 billion, while strain on nonprofit services are increasing. We urge the
Fed to include nonprofits in the Main Street Loan program, or create a program for nonprofits to fulfil l
§4003(c)(3)(D) of the CARES Act that should:
• Include an interest rate of 0.50% (SO basis points) for 50l(c)(3) charitable nonprofits at a 5 year
amortization
• Provide priority to 50l(c)(3) charitable nonprofits responding to COVID-19 relief efforts and
require lenders to make a proportionate number and value of loans to nonprofits to prevent
the crowding out that is being seen in the Paycheck Protection Program
• Set a date certain for when employee retention provisions should begin • Payments shall not
be due until two years after a direct loan is made
The Federal Reserve and Treasury must act swiftly to avoid immed iate nonprofit layoffs, furloughs,
and closures. Our community members, nonprofits, and the city's survival are on the line.
Sincerely,
Chai Jindasurat, Policy Director
Ap1i1 16, 2020
VIA Federal Reserve Email
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue N.W.
Washington, DC 20551
Re: Main Street Lending
Dear Board of Governors of the Federal Reserve System:
On behalfof our nation's venture capital investors and the 2.27 million workers who are building the
next generation of venture-backed companies driving innovation, job growth and economic expansion
in the United States, I write to provide our comments on the Main Street Lending Facility announced
by the Federal Reserve ("MSLF"). The changes to MSLF discussed below would further the aim of
the Federal Reserve System to bridge the liquidity disruptions arising in connection with the COVID-
19 pandemic. We believe that adoption of these changes will pennit the programs to more fully
satisfy the aim of re-establishing damaged or destroyed liquidity (and the ability to pay current
obligations and employee salaries) and support companies and their employees through the COVID-
19 crisis.
The comments cover: (1) the EBITDA test and minimum cash flow requirements for a business to be
considered for an MSLF loan; (2) the scope of prohibitions on capital distributions; (3) availability of
funding for companies addressing the COVID- 19 vims and attendant medical challenges; (4) the
nature of the limit on employee and executive compensation; (5) priority of existing loans; and (6)
payment on other debt.
1. EBITDA test as gating factor
Problem - The cmTent MSLF test for minimum and maximum loan size uses a measure
applicable to profitable companies with records of operation that have built up over several
years. Because of this test, MSLF risks excluding virtually all companies who are in their
growth phases. These companies include venture-backed growth companies that commonly use
up investment capital to conduct research and development and invest in hiring and other scaling
activities before revenue reaches a level that outstrips current expenses. This activity creates
current year losses in a bid for long-term value creation. These businesses may not be profitable
or cash flow positive yet. Free cash flow is not the only (or even best) measure of liquidity or
potential for a venture-backed growth company, and the absence of free cash flow does not mean
that the company is not in good financial standing. Rather, the fact that the venture-backed
growth company has capital and an equity valuation means the business has real promise, and by
extension employs American workers and benefits the economy.
Solution - An alternate test can accurately reflect an appropriate loan size for venture-backed
grnv,nh companies. In lieu of using the EBITDA test for venture-backed growth companies, we
recommend an additional test based upon percentage of valuation (for private) or market
capitalization (for public) for companies in their growth phases. For private venture-backed
growth companies, the test could look to the most recent Internal Revenue Code Section 409A
valuation; post-money valuation from the most recent financing round in an arms' length
transaction by a third party investor; or the dollar amount of investment in the preferred equity
held in the company, and then use a percentage (15-25%) to create the upper bound of the
loan. For public growth companies, the test could look to a percentage of 50-week average
market capitalization for the period ending p1ior to the beginning of the COVID-19 economic
crisis (similar to EBITDA test). The maximum loan size of $25 million would not be changed.
2. Capital distribution challenge should be clarified
Problem - The capital distribution limitation in MSLF may remove liquidity from acquisition or
initial public offering (IPO) activity for up to 12 months after repayment of the loan. This would
be problematic if the loan is retired as part of an acquisition or an IPO but equity holders cannot
receive proceeds for the sale of their equity for a year after that. This could chill IPOs and
acquisitions that benefit companies and their customers, employees and the economy.
Solution - Exempt from the distribution limitation any amounts distributed to shareholders in an
acquisition or IPO, provided that the MSLF loan is paid off prior to the acquisition or IPO, or
asset or liquidity buffers are retained to ensure full repayment of the MSLF loan p1ior to
distributions.
3. Possible unavailability to capital access for companies directly combating the COVID-19
crisis
Problem - Because availability of MSLF is keyed to needs arising due to "exigent
circumstances of COVID-19," some companies could conclude that they are excluded from
paiticipation in the MSLF if they need funds to scale up production, distribution or testing to
produce products that will directly suppo1t effo1ts to combat the COVID-19 crisis (e.g.,
vaccines, research and production of testing devices or treatment drugs, development of medical
equipment, and more).
Solution -Clarify that exigent COVID-19 circumstances include activities that further efforts to
combat COVID-19 and effect on companies, markets and the economy.
4. Potential challenges with preexisting stock and equity award agreements with executives
Problem - If the limit on executive compensation sweeps in stock vesting from previously
agreed upon stock compensation arrangements, even though stock-based compensation is illiquid
stock, it may exclude venture-backed growth companies that otherwise would be eligible for the
program. While compensation limitations ai·e important, if the rules require counting illiquid
stock awards arising from agreements entered into prior to enactment of the CARES Act vests
during the period the loan remains outstanding, the rules could create confusion and significant
adverse outcomes for venture-backed growth company workers and executives.
Solution - For purposes of calculating compensation during the time period that the loan
remains outstanding, disregard stock or equity awards that vest under stock or equity award
agreements that took effect prior to March 27, 2020.
5. Existing lenders' unwillingness to agree to MSLF loans that are pari passu with or senior
to existing creditors
Problem - Many venture debt arrangements (as well as more traditional debt arrangements)
allow existing creditors to prohibit or restrict new debt. This means bo1Towers must obtain
lender consent before MSLF loans can be accepted.
Solution - Permit other lenders to restructure other debt so long as it does not create debt senior
to the MSLF loan, and that the MSLF loan is not used to pay down other debt.
6. Limitations on reductions in debt and existing lines of credit by the lender
Problem - Lenders would lose the ability to restructure credit lines or otherwise reduce debt
owed by borrowers when the MSLF loan is outstanding, which would create credit and asset
management dangers for banks who provide other loans to the borrower.
Solution - Provide that limitations on reductions in debt and existing lines of credit by the lender
be in place only for the first year of the loan.
Bringing in venture-backed growth companies under the MSLF program would help provide liquidity to
these small-to-medium sized enterprises to sustain their businesses and their markets, assist their
millions of employees, and provide support for a critical growth engine for our economy post-COVID-
19.
Thank you for your remarkably fast work in setting up the MSLF in support of U.S. companies and for
your consideration of our comments.
Sincerely,
Bobby Franklin
President and CEO
Accompanying Charts to Submission of NVCAApril 16, 2020
Main Street Lending Facility (MSLF) Program
Please refer to Federal Reserve web portal submission by NVCAApril 16, 2020 for
accompanying text
Chart 1
on behalfof
US Venture Capital Investors
who fund
US Companies and
Enterprises
that drive
Job Growth
J
Economic Expansion Innovation
And employ approximately
2.27 million workers
Chart2
EBITDA controls minimum loan size for MSLF
EBITDA = (Revenue - expenses) + Interest, Taxes, Depreciation, and Amortization
Its focus:
• Profitable companies with records of operation that have built up over several years
It excludes:
• Venture-backed growth companies
Why?
For a mature company payment of expense depends on Revenue
Revenue Expense
EBITDA
lntere~
Amortization
For a venture backed growth company, payment of expense depends on using invested capital to
conduct research and development and hire and scale operations
Assets Liabilities and Capital
2
Until revenue reaches a level that outstrips current expenses
These businesses may not be profitable or cash flow positive yet.
Accordingly...
Chart 2 cont'd
Free cash flow is not the only (or even
best) measure of liquidity or potential
for a venture-backed growth company
The absence of free cash
flow does not mean that
the company is not in
Qood financial standinQ.
3
Chart3
Alternate Sizing metric for venture-backed growth company
Private Companies Public Companies
TEST TEST
MSLF Debt
limited to
a percentage of:
50-week average market
capitalization, for the period
ending prior to the beginning of
the COVID-19 economic crisis
(similar to EBITDA test).
or or
4
RETAIN $25MM CAP BUT SIZE MINIMUM LOAN TO USE ALTERNATE TEST
UNDERWRITEN BY BANKS PER CUSTOMARY PROCESSES
5
Chart4
MSFL Loans available to enterprises
For liquidity needs arising
due to "exigent
circumstances of
COVID-19"
But we need companies to
scale up production, distribution or testing
to produce products (e.g., vaccines, research
and production of testing devices or
treatment drugs, development of medical
equipment, and more)
These necessary activities and companies could be excluded from MSLF if they don't fit the
exigent circumstances text.
6
• O'Neal Industries, Inc.
2311 Highland Avenue South, Suite 200
ONI
□'NEAL INDUSTRIES
Birmingham, AL 35205
205.721.2880
onealind.com
Ron Travis, Jr.
Vice President. Tax & Leaislative Affairs
April 16, 2020
Federal Reserve Board
2oth Street and Constitution Avenue, N.W.
Washington, D.C. 20551
Dear Board Members:
I am hereby providing comments with respect to the Main Street New and Expanded Loan Facility term
sheets. There is a provision in both facilities that requires a borrower to calculate and deduct from its
maximum loan the amount of its "committed but undrawn debt" While the intent of this provision
appears to be to require a business to use its available debt before taking advantage of the MSLP loans,
the provision in practice makes O'Neal Industries ineligible for the MSLP program.
O 'Neal is a 99-year-old family owned business in the Metals Distribution and Processing industry with
locations in 30 states. We use an asset-based lending facilit to fund our inventory needs. Co~enti
usmess
lnfonnation
fidential Business lnfomiation
Absent that, we urge the Federal Reserve to consider modifying the Loan Facility Term sheets to allow
borrowers to calculate their loan amounts using only the amount of "committed but undrawn debt" that is
available to them without punitive bank responses.
We propose two modifications for your consideration:
Option 1:
• Substitute ·available" for ·committed" in item 5.
• Add the following clarifying language: "For purposes of determining the eligible loan amount, an
eligible borrower's existing outstanding and available but undrawn bank debt does not include
any amount that, if drawn, would cause the Borrower to suffer fees, penalties, restrictions, or
limitations on its operations. Lease financing obligations are also excluded."
Page 11
•
ONI
□'NEAL 1N6ifsTR1Es
Option 2:
• No change to the term committed in item 5.
• Add the following clarifying language: "For purposes of determining the eligible loan amount, an
eligible borrower's existing outstanding and committed but undrawn bank debt does not include
any amount that is not currently available under the terms of the facility, nor does it include any
amount that, if drawn, would cause the Borrower to suffer fees, penalties, restrictions, or
limitations on its operations. Lease financing obligations are also excluded."
Either of these options would allow us to participate in the Expanded Loan Facility .
Thank you for your consideration .
Sincerely, ,.____.~
/4avis,Jr.
Vice President, Tax
O 'Neal Industries, Inc.
Office: 205-599-8415
Cell: 205-910-6949
Fax: 205-599-8516
Rtravis@Onealind.com
Page 12
CIJnecall
April 16, 2020
Members of the Board of the Federal Reserve System
20th Street and Constitution A venue
Washington, DC 20555
RE: Main Street Lending
Dear Chairman Powell and Members of the Board of the Federal Reserve:
Thank you for the opportunity to provide comments on the Federal Reserve's recent
announcement on lending facilities as part of the Coronavirus Aid, Relief, and Economic
Security Act ("CARES Act"). Like many companies around the country, One Call is doing
our part to minimize the negative impact on our associates, injured workers that we serve,
health provider partners, and our customers while continuing to fulfill our mission of
ensuring injured workers receive the care they need, when they need it. We commend the
Department of Treasury for providing initial guidance on implementation of the various
provisions aimed at assisting American companies during this difficult time.
One Call's Critical Role in the Workforce and Economy
One Call plays a critical and significant role in the nation's economy and workforce in our
position as the nation's largest provider of specialized health services for injured workers.
Based in Jacksonville, FL, we employ over 2,600 people throughout the country with
additional employment centers in New Jersey, Pennsylvania, New York, California,
Missouri, Georgia and Texas. Our employees, the injured workers we serve, and our
healthcare provider partners are at the center of everything we do in achievement of One
Cali's mission; to ensure that injured workers receive the care they need, when they need
it. We accomplish this through best-in-class provider networks throughout the country that
allow the injured worker to experience a coordinated and connected experience with
healthcare providers. In addition, this experience enables an efficient and effective pathway
for the injured worker to return to work. Our diverse networks include many of the crucial
ancillary healthcare services necessary to help the injured worker return to work after their
injury. These services include physical therapy, transportation, diagnostic imaging, home
health, translation services and durable medical equipment. It is this unique, coordinated
care model that enables the injured worker to receive the best healthcare possible while
maintaining costs and efficiencies for our customers who represent the largest employers
throughout America.
As the nation's economy has come to a virtual standstill., the immediate effects upon all
corners of the economy have been significant. Whether it has been the closing of a
restaurant or store due to stay-at-home orders, or an injured worker having to cancel their
medical appointment because their doctors are not able to take patients, there is little
immunity to the broad impact of this crisis. Within our own industry, which is closely tied
onecallcm.com DfNTAL DIAGNOSTICS EQUIPMENT + DfVICfS HOM< HEALTH + COMPLEX CARE PHYSICAL THERAPY TRANSPORT + TRANSLATE
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CIJnecall
to the American workforce, we have seen many customers and partners make the difficult
decision to layoff or furlough their workforce.
One Call Recommends that the Federal Reserve Exercise Flexibility in Administering
Lending Facilities
As the nation continues to navigate this difficult situation, it has become evident that both
the short-term and long-term negative impacts on companies and workers around the
country, including One Call , will be significant. We appreciate the efforts made through
the CARES Act of 2020 to provide the necessary resources to the Federal Reserve to
pursuant to the Main Street Expanded Loan Facility ("MSELF") and the Main Street New
Loan Facility ("MSNLF"). One of the primary goals of the CARES Act is to help stabilize
and minimize the economic impact of the COVJD-19 pandemic. We believe that these
facilities will greatly assist many companies throughout the nation as they face the
eco nomic challenges ahead.
\Ve also believe that the Federal Reserve should exercise as much flexibility
(especially around the definition of EBITDA) as possible and within its authority to
ensure that as many disproportioned impacted companies as possible are able to
gualifv for "Eligible Loans" within the available lending facilities, especially the
l\1SELF. For example, there are many definitions for EBITDA and, in some cases, the
definitions are set forth in the term loan credit facility that will be upsized by the MSELF
or the MSNLF. A consistent definition of EBITDA, including the use of Pro Forma
EBITDA as a financial measure would have the potential to expand the pool of eligible
enterprises, strengthen the economy, and further accomplish one of the core goals of the
CARES Act - protecting the American worker. Choosing a one-size-fits-all definition of
EBITDA could have the unintended consequence of disqualifying companies in need,
especially those that are directly tied to the delivery of vital healthcare related services and
other critical industries.
As the impact of the COVlD-1 9 pandemic is severe, it is likely that many companies within
range or just above the definition of Eligible Loans could be disproportionally impacted
without access to these facilities. For example, the proforma 6x or 4x multiple on 2019
EBITDA, could further disqualify companies that may have had a challenging 20 l 9 due to
lower demand, tariff implications, etc.• and would foreclose such companies from the
availability of much needed liquidity. These companies and industries are currently having
to make the same difficu lt decisions (and likely more significant future decisions) around
workforce levels as those compan ies that fall within the limited definition of an Eligible
Loan.
****
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2018 One Cu!I Care Management All Rights Reserved
CIJnecall
One Call greatly appreciates the opportunity to provide our perspective on this critical
issue. With the critical role we place in the workforce and economy, we look forward to
continuing to provide injured workers the care they need, when they need it, throughout
the current situation and into the future. Ensuring that there is as much flexibility as
possible in qualifying for the various lending facilities, including the MSELF, will help
ensure that critically important companies like One Call can continue fulling their mission.
Sincerely,
Thomas W. Warsop, III
Chief Executive Officer
One Call
onecallcm.com DfNTAL DIAGNOSTICS EQUIPMENT + DfVICfS HOM< HEALTH + COMPLEX CARE PHYSICAL THERAPY TRANSPORT + TRANSLATE
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@ Par Pacific
April 16, 2020
By Email
Jerome H. Powell
Chair
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Was hington, DC 20551
Re: Comments Regarding Main Street Lending Programs
Dear Chair Powell:
I write on behalf of Par Pacific Holdings, lnc. ("PPHI"), an energy company in the
refining, retailing, and logistics spaces. PPHJ appreciates the decisive actions of the Board of
Governors of the Federal Reserve System (the "FRB") and the Treas ury Department during these
uncertain times, and is grateful for the opportunity to provide comments regarding the FRB's
Main Street Lending Program. We hope that the two facilities that comprise this program - the
Main Street Expanded Loan Facility ("MSELF") and the Main Street New Loan Facility
("MSNLF")- will provide a valuable source of financing for companies across a range of
industries as the nation weathers the ongoing public health crisis and the related economic
impact.
This comment letter raises five issues applicable to the Main Street Lending Program. As
currently contemplated by the term sheets for the MSELF and the MSNLF the FRB published on
April 9, we believe that the terms of these facilities do not optimally account for the ways in
which some businesses operate, and thereby may inadvertently limit borrower access to the Main
Street Lending Program and the loan amounts available to those borrowers. Therefore, we would
respectfully suggest making the following five changes to the terms of these facilities, which we
believe would enhance credit available to eligible businesses and allow lenders to better serve the
policy aims for which Congress, the Treasury Department, and the FRB have created the Main
Street Lending Program.
I. The FRB Should Determine J\faximum Loan Size Based Upon the Consolidated
Operations ofa US. Business Organization, Rather than the Specific Subsidiary that
is the Borrower.
The Main Street Lending Program is available to eligible bmTowers that have up to
10,000 employees or up to $2.5 billion in 2019 revenue. As is appropriate in these challenging
economic circumstances, this set of eligibility criteria appears intended to cover a wide range of
potential borrowers across industries, business stages and sizes, and corporate structures.
Accordingly, many borrowers that seek to participate in either the MSELF or the MSNLF have
complex corporate structures that utilize subsidiaries or other special purpose vehicles to borrow
money to support tbe financing needs of the overall business. These s tructures are often
1
employed for administrative, tax, or other reasons that should not affect the ability of the larger
business organization to participate in the MSELF or MSNLF.
In many cases, loans to such financing vehicles are supported by guarantees or other
credit support from the parent company or other major operating subsidiaries of the business
organization. The financing vehicle itself may have significantly fewer assets, sources of
revenue, and employees, which are more often located at the operating companies or the parent
company. Accordingly, ifthe term sheets published by the FRB for the MSELF and MSNLF are
not interpreted to include the consolidated business operations ofthe parent company with regard
to debt, revenue, and other financial measures that impact the maximum loan size available to an
eligible borrower, many otherwise e ligible borrowers will be excluded from participating in the
MSELF and the MSNLF.
For example, under the MSELF, in some industries a parent company may not have an
eligible term loan outstanding as required by the term sheet, even though one of its subsidiaries
does. The parent company should not be prohibited from participating in the MSELF as a result.
Similarly, a financing subsidiary may hold most or all of a business organization's debt burden,
but most or all of the revenues may flow up to the parent company through operating subsidiaries
that do not sit under the financing subsidiary from a structural perspective. In those cases, the
financing subsidiary may not have the earnings before interest, taxes, depreciation, and
amortization ("EBITDA") to obtain a loan under the MSELF or MSNLF given the leverage
restrictions.
However, the purpose of the. Main Street Lending Program is to provide credit to
businesses facing financial difficulties in light ofthe economic fallout from the ongoing public
health crisis. If the FRB requires the "Eligible Borrower" under these facilities to account only
for its own financial position without regard to the fact that it is part of a complex corporate
structure in which many of the assets, employees, and revenues are located elsewhere, loan sizes
will be artificially constrained and many borrowers entirely excluded in a manner that we do not
believe was intended.
We be lieve that the FRB should clarify its position with respect to an "Eligible
Borrower" by taking a holistic view of the business organization that is seeking a loan, rather
than looking at which legal entity directly borrows under such loan. Doing so would allow the
size ofthe loan to be determined based upon the needs ofthe entire business organization, rather
than artificially limited based upon the finances of the specific vehicle that holds the debt.
We understand that doing so may pose additional risk to the FRB's lending facilities,
given that a particular borrowing entity may lack the financial wherewithal of the entire
company. To address this concern, we believe that the FRB could require some additional form
of credit support from the parent company or major operating subsidiaries, such as a guarantee,
which would align with the manner in which loans to financing vehicles are often underwritten.
We believe the "Eligible Lenders," which will retain 5% of the risk ofloans, should be able
through their underwriting processes to assess the need for such support, especially in the case of
the MSELF where the lender is already familiar with the borrower's organization and may have
an existing loan with that structure.
2
Finally, in the event the FRB does not grant the relief we have requested, it should at a
minimum clarify that an existing term loan (originated on or before April 8, 2020) to a subsidiary
could be assigned to a parent company or major operating subsidiary, thus making the parent
company or major operating subsidiary eligible to participate in the MSELF. This is especially
necessary where the parent company or other major operating subsidiary was already providing
credit support for the loan.
2. The FRB Should Not Require Collateral for Loans Under the Main Street Expanded
Loan Program to be Shared on a Pro-Rata Basis.
The term sheet for the MSELF provides that any collateral securing an e ligible loan,
whether pledged under the original terms of the loan or at the time the loan was upsized, will
secure the FRB's loan participation on a pro rata basis. We believe that many lenders will be
unwilling to make loans that require them to share loan collateral on a pro rata basis, especially
when the upsized tranche of the loan would not involve the pledge of additional col.lateral by the
borrower. This position has been confirmed through our discussions with one of our existing
lenders. The risk that a lender would be required to accept in an MSELF loan exceeds merely the
5% of the upsized tranche that the lender retains; it also includes dilution of collateral that the
lender obtained to secure the original term loan. This provides a clear disincentive to
participating, as dilution of an existing lender's collateral for the original loan would effectively
reduce the value of the collateral below the level that the lender thought was appropriate in
making the initial loan. Therefore, we believe that the FRB should permit all or at least a portion
of the upsized tranche to be made available on an unsecured basis, and not require collateral
posted at the time of the original loan to be shared pro rata with respect to the FRB's
participation in the upsized tranche. In the event the FRB does not grant such relief, we believe
that the FRB should take only a second-lien (or otherwise wholly subordinated) position with
respect to its pro rata share of the collateral, rather than a first-l ien position. Changing the
program in this manner will encourage lenders that otherwise might not be inclined to participate
in the program to do so. This, in tum, will increase the availability of financing for businesses
that need it, and thereby better fulfill both the congressional purpose for enacting this authority,
and the FRB's purpose in implementing it.
3. The FRB Should Permit Loans Other Than Term Loans (e.g., Revolving Loans) to
Qualify as Eligible Loans for the Main Street Expanded Loan Program.
In order to qualify as an e ligible borrower under the MSELF, a company must have taken
out a term loan from an eligible lender before April 8, 2020. However, many businesses rely
upon forms of financing other than term loans, such as revolving loans. A business may have
previously elected to obtain a type of loan other than a term loan for various reasons, including
general practice within the particular industry or the distinctive financing needs of the particular
business. This choice does not necessarily reflect whether such business is negatively and
adversely impacted by the economic conditions associated with the ongoing public health crisis.
In light of the difficulty in obtaining competitive financing in the current economic environment,
a potential borrower may need term financing under the MSELF even if in more normal
circumstances it would not have sought that type of loan. However, limiting such borrowers to
participation in the MSNLF, with its smaller maximum loan size and more substantial fees,
places these borrowers at a disadvantage simply for selecting a revolving loan over a term loan in
3
a different economic context. As such, we recommend that the FRB open the MSELF to all
borrowers that hold loans from eligible lenders taken out before April 8, 2020, regardless of
whether the loan in question is a term loan. This will increase the availability of credit to
potential borrowers, thereby furthering the aims of the Main Street Lending Program, and
assisting worthy businesses during a difficult economic period.
4. The FRB Should Increase the Maximum Size ofLoans Under the Main Street New
Loan Facility.
Currently, there is a wide gap between the maximum size of loans available under the
Main Street New Loan Facility and under the Main Street Expanded Loan Facility. Many
eligible borrowers that would prefer to obtain financing under the MSELF may not have an
outstanding eligible term loan to upsize, or may have one from a lender that is not eligible to
participate as a lender in the MSELF, and accordingly those borrowers are forced to rely on the
MSNLF. At present, the MSNLF has a substantially lower maximum loan amount. This amount
may be insufficient for medium-size companies that would otherwise have sought more
financing. Given the widespread disruption to the economy, and the acute need for financing
faced by many companies, we believe that the FRB should seek to narrow the gap between the
two programs. Therefore, we would recommend that the FRB increase the maximum loan size
available under the MSNLF. This is appropriate given the minimal differences in risk allocation
between the two loan facilities. Generally, we would recommend that the FRB increase the
maximum loan size under the MSNLF to the lesser of$150 million or six times EBITDA.
5. The FRB Should Use EBITDA Calculations That Companies Have Relied Upon for
Purposes ofPublic Reporting to Determine Maximum Loan Size.
EBITDA is a non-GAAP measure that is calculated differently across industries and
businesses in order to analyze the value of a business in its particular context. Adjustments to
EBJTDA may provide industry participants, lenders, and investors with greater insight into a
company's financial condition than GAAP-only financial statements do on their own. The
Securities and Exchange Commission ("SEC") generally restricts the use of non-GAAP
measures in financial reporting. See 17 C.F.R. § 229.10(e). It does, however, permit the inclusion
of a company's EBITDA, provided that the manner in which it is calculated conforms to SEC
standards. See, e.g., Non-GAAP Financial Measures, Questions and Answers of General
Applicability, Question 103.01 (Last Updated April 4, 2018) (available at
https://www.sec.gov/divisions/corpfin/guidance/nongaapinterp.htm). To the extent that a reporter
includes an EBITDA measure that deviates from the SEC definition, the reporter must refer to it
by an alternate title, such as "Adjusted EBITDA." See id.
Many lenders and investors have made loans to, or investments in, many companies
based on adjusted EBITDA measures. Indeed, some ofthe term loans eligible to be upsized
under the MSELF were likely underwritten based at least in part on such measures, and such
agreements typically include covenants or other tests that may be calculated based on adjusted
EBITDA. We recognize that, for consistency in measuring maximum loan size under the Main
Street Lending Program, the FRB intends to impose standards on how EBITDA is calculated.
However, we believe that for purposes of calculating the maximum loan size under either the
MSELF or the MSNLF, an eligible borrower should be permitted to rely on an adjusted EBITDA
4
number if the bon-ower can demonstrate that it regularly reports such an adjusted EBITDA
calculation in its SEC filings and the manner in which an adjusted EBITDA is calculated is
clearly disclosed therein . This would permit loans made under these facilities to better reflect the
economic realities of borrowers by better accounting for the types of metrics employed in
different industries as indicators of a company's financial health , without allowing potential
borrowers to make new adjustments to the EBITDA calculation solely for purposes of obtaining
a larger loan. It would also be consistent with lender practices, as oftentimes loan covenants use
alternative measures of EBJTD A as a means of restricting a borrower's activities. Not permitting
any adjustments to EB[TDA would significantly limit the loan size for many potentially eligible
borrowers.
PPHI appreciates the opp01tunity to provide these comments. If you have any questions
regarding our comments, please do not hesitate to contact the undersigned at (281) 899-4834, or
by email at wmonteleone@parpacific.com, or our counsel in this matter at Sidley Austin LLP,
M ichael Lewis, at (202) 736-8959.
Very truly yours,
William Monteleone
Chief Financial Officer
Par Pacific H oldings, Inc.
cc: Secretary Steven T. Mnuchin, Depa1tment of the Treasury
M ichael Lewis, Sidley Austin LLP
5
PBF Energy Inc.
One Sylvan Way, 2 nd Fl.
Parsippany, NJ 07054
PH: 973-455-7500
www.pbfenergy.com
April 16, 2020
The Honorable Steven Mnuchin The Honorable Jerome Powell
Secretary Chairman
U.S. Department of the Treasury Board of Governors of the Federal Reserve System
1500 Pennsylvania Avenue, NW 20th Street & Constitution Ave., NW
Washington, DC 20220 Washington, DC 20551
Re: Main Street Expanded Loan Facility
Dear Secretary Mnuchin and Chairman Powell:
On behalf of the more than 4,000 employees at PBF Energy Inc. ("PBF"), we would like to t hank you for
your leadership during this tumultuous time. We commend you both for your unwavering dedication in
combating the coronavirus pandemic's adverse impacts on the U.S. economy. We would like to take t his
opportunity to offer comments regarding the Main Street Lending Program ("MSLP"), and specifically,
the Main Street Expanded Loan Facility ("MSELF").
PBF operates six highly complex petroleum refineries in New Jersey, Delaware, Ohio, Louisiana and
California, with a nameplate throughput capacity of more than one million barrels per day. Significant
capital investment and high fixed costs are a prerequisite to maintaining a safe operating envelope in
our industry, and our business requires a highly skilled labor force to manufacture the highest quality
gasoline, diesel and jet fuel that truly fuels the quality of life in America and worldwide.
Travel and lifestyle restrictions necessary to combat the coronavirus pandemic have resulted in massive
demand destruction for our core products. Jet fuel volumes are down more than 70 percent, with
declines of more t han 50 percent for gasoline throughout the country. Putting those figures in
perspective, normal economic downturns would result in demand losses of approximately 10 percent.
Based on yesterday's U.S. Energy Information Administration (EIA) release, trailing four-week gasoline
demand is the lowest figure on record.
After reviewing the proposed terms of the MSELF, it would be helpful if the Treasury Department and
the Federal Reserve ("the Fed") could clarify the "term loan" language included in the characterizat ion
of "Eligible Loan" on the program term sheet. In our experience, many companies utilize revolving, or
other credit facilities in lieu of bank term loans. These credit facilities will typically have many similar
characteristics to term loans in that they are originated and held by banks, are secured with various
forms of collateral, contain financial covenant packages, and have a typical tenor of three- to five-years.
However, revolving credit facilities may provide more flexibility for a borrower that elects to utilize the
public capital markets to finance their long-term debt while relying on credit facilities to finance day to
day operations.
If t he phrase "term loan" is interpreted in t he narrowest sense, many companies may not be able to
participate based on the sole reference to "term loan" under the term sheet's "Eligible Loan" section.
As a result, it would be helpful for Treasury and the Fed to clarify that revolving credit facilities, or any
credit facility that is currently secured with a company's collateral, are eligible for inclusion in the
program. Treasury and the Fed could also make it clear that the "upsized t ranche" added to a term loan
or an existing revolving or other credit facility that is currently secured with a company's collateral must
meet the features for an "Eligible Loan" detailed on the MSELF term sheet.
In closing, we would like to reiterate our appreciation for your continued efforts and for the hard work
t hat you and your respective teams have undertaken to implement the Coronavirus
Aid, Relief, and Economic Security Act ("CARES Act") and keep our economy positioned for a speedy
rebound. Thank you for your consideration.
Sincerely,
Erik Young
Chief Financial Officer
2
ll
RANGE RESOURCES"
Jeffrey L. Ventura
Chief Executive Officer and President
Jventura@rangeresources.com
817-869-4289
April 16, 2020
The Honorable Jerome Powell
Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW
Washington, DC 20551
The Honorable Steven Mnuchin
Secretary of the Treasury
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220
Re: Main Street Lending Program
Dear Chairman Powell and Secretary Mnuchin,
Thank you for your leadership during this turbulent time. Personally, and on behalf of our 649
employees, we appreciate the extraordinary actions taken by the Federal Reserve and U.S.
Department of the Treasury to support the economy, assist employers of all sizes, and bolster
the ability of government to deliver critical services in response to the coronavirus pandemic.
As you proceed in your plans for the Main Street Lending Program, we know you recognize
businesses vary widely in their financing needs, and we appreciate the opportunity to provide
input to help ensure the program supports the economy as effectively, efficiently and responsibly
as possible.
Businesses Like Range Resources Are the Main Street Economy’s Backbone
As you and your colleagues at the Federal Reserve and Treasury continue to work on relief
measures to mitigate the effects of the pandemic on our economy, we know that you are seeking
to create programs that provide flexible support for critical industries that make up our nation’s
economy.
We appreciate the opportunity to share with you the way our business operates, as well as the
importance of America’s energy sector within the U.S. economy. As a result, we hope that you
keep in mind the key role that businesses like Range Resources play in supporting America’s
economy.
The economic impact of America’s energy sector is considerable, and it is U.S.-based
independent natural gas producers, such as Range, and their diverse supply chains that are the
Range Resources Corporation 100 Throckmorton Street, Suite 1200 Fort Worth, Texas 76102
April 16, 2020
Page 2
economic lifeblood of the industry. America’s natural gas and oil industry supports more than 10
million jobs and nearly eight percent of our nation’s Gross Domestic Product. Independent U.S.-
based producers like Range produce 90 percent of America’s natural gas.
Energy companies like ours also reinvest billions of dollars back into the American economy. In
Pennsylvania where our operations are centered, Range has delivered significant economic
benefits to our local communities, including $3.5 billion in leasing and royalty payments since
2006.
We deeply value local business partnerships and strive to improve employment and economic
opportunity for the communities in which we operate. We assume the aim of the Main Street
Lending Program is to help companies like ours that deliver meaningful economic impacts to their
local communities.
The Story of Range is the Story of American Small Business
From pioneering the first successful Marcellus Shale well in 2004 to becoming the first U.S.-
based company to export ethane via the Port of Philadelphia, Range has been a distinctly
American success story. Range continues to be a leader in U.S. natural gas production, supplying
domestic and international industry. America’s role as the world’s top natural gas and oil producer
is strong because of independent U.S.-based natural gas producers like Range, and that strength
contributes to U.S. geopolitical resilience and economic security.
With the majority of the company’s workforce and operations in Southwestern Pennsylvania,
Range directly employs 649 individuals and supports the jobs of thousands of people who are
employed by our various service providers. Unfortunately, small businesses like ours are not
immune to the harsh realities impacting the American economy due to the COVID-19 pandemic.
As we navigate the effects of the pandemic, including temporarily decreased demand for our
products, there are many difficult decisions that Range and other businesses our size are facing.
Now more than ever, support for job-creators like Range is essential to ensuring our economy is
prepared to rebound as we transition through this health and economic crisis.
Main Street Lending Program Flexibility
We applaud the Federal Reserve for using its full range of authorities to provide powerful support
for the flow of credit in the economy, and for creating a program aimed at assisting small and
mid-sized businesses. This has had immediate impact in stabilizing the credit markets, although
those markets are not currently available to companies like ours to refinance short and near term
debt maturities.
Unfortunately, the current restrictions on the use of funds made available through the Main Street
Lending Program would prevent companies like Range from effectively utilizing Federal Reserve
assistance in ways that would provide the most help to our business.
The draft term sheet for the Main Street New Loan Facility includes provisions that borrowers
“must commit to refrain from using the proceeds of the Eligible Loan to repay other loan balances”
and “must commit to refrain from repaying other debt of equal or lower priority, with the exception
April 16, 2020
Page 3
of mandatory principal payments, unless the Eligible Borrower has first repaid the Eligible Loan
in full.”
We ask that you provide additional flexibility regarding this restriction for borrowers that would
otherwise qualify for the Main Street Lending Program. The launch of both the Primary Market
Corporate Credit Facility and the Secondary Market Corporate Credit Facility demonstrate the
recognition on the part of the Federal Reserve and the Treasury that disruptions to economic
activity have heightened the need for companies to obtain financing in order to pay off existing
short and near term debt maturities and therefore sustain themselves until economic conditions
normalize and the credit markets are once again available.
Many small businesses, like Range, are seeking a bridge from crisis to recovery, and allowing
the use of Main Street New Loan Facility funds for debt payments will help keep these engines
of America’s economy afloat.
A Stronger American-Focused Recovery
As we look ahead, businesses like Range will be integral in helping our nation regain its post-
crisis footing.
Through partnerships and a robust energy infrastructure across Southwestern Pennsylvania,
Range safely produces clean natural gas that provides affordable, reliable power for consumers,
small businesses and hospitals.
Range-produced natural gas also serves as a key input for domestic manufacturers that utilize
the resource to create life-saving products, including critical pharmaceuticals and plastics for
medical devices as well as military equipment and supplies.
Through this crisis and as our economy rebounds, natural gas producers like Range will be critical
in providing energy to meet America’s agricultural and food needs as well as the growing energy
demands of our allies around the world.
There’s no question that this affordable and abundant energy resource will be crucial in
jumpstarting the economy in the COVID-19 aftermath. As the Federal Reserve and Treasury
move forward with plans for the Main Street Lending Program, we ask that you take into
consideration the importance of small businesses to the American economy, and you ensure that
these businesses are able to access the capital they need to withstand these challenges and play
their part in boosting the U.S. economy as we turn the corner on this challenging period.
With your support, Range and smaller businesses like ours will help the American economy
maintain its position of strength in the months and years that follow this crisis. Thank you again
for your leadership and for considering these comments. Please contact me with any questions.
Respectfully,
Jeffrey L. Ventura
Chief Executive Officer and President
Range Resources Corporation
April 16, 2020
Honorable Jerome Powell, PhD
Chairman
The Board of Governors for the Federal Reserve System
20th Street and Constitution Avenue N.W.
Room B-2052
Washington, DC 20551
Dear Chairman Jerome Powell,
To combat the COVID-19 crisis, the Federal Reserve announced that through its Main Street Loan
Facility and Main Street Expanded Loan Facility it will purchase a combined total of $600 billion of
conforming, non-forgivable loans to entities with up to 10,000 employees or up to $2.5 billion in annual
revenues.
We are deeply concerned by the Federal Reserve’s intent to exclude nonprofit organizations from
these loans. This is particularly concerning for a number of nonprofits that are also not eligible for
forgivable loans under the Small Business Administration’s Paycheck Protection Program (PPP),
created by the CARES Act. We urge the Federal Reserve to immediately address this omission and
make nonprofit organizations eligible under the Main Street lending facility.
The PPP currently excludes most nonprofits with over 500 employees. This includes some of the most
effective nonprofits working to help vulnerable individuals find and maintain employment in
communities across America, including several major employment social enterprises (ESEs). These
ESEs are mission-driven, revenue-generating entities that provides employment and on-the-job work
and life skills training to participants who face barriers to employment (e.g. formerly incarcerated
individuals, recently homeless individuals, or opportunity youth). There are over 400 ESEs in 43 states.
Research has shown that 215 ESEs have employed, trained, and supported over 50,000 workers and
have helped individuals overcome significant barriers to work while earning almost $1 billion in wages,
support services, on-the-job training, and expand economic opportunities.
We note that Section 4003 of the CARES Act provides for a separate lending program for “mid-sized”
businesses and other entities with between 500 and 10,000 employees, and specifically mentions
nonprofits as eligible entities. The legislation caps interest payments under this program at two
percent and defers principal and interest payments for at least six months. We further urge the Federal
Reserve and the Department of Treasury to coordinate, announce, and implement this program
expeditiously, as many ESEs and other nonprofits need access to this lending with great urgency.
We also note that this second “mid-sized” section 4003 lending program is not available to entities
with fewer than 500 employees. Although smaller nonprofits are eligible for the PPP, given some of
the PPP’s limitations, including backlogs associated with its initial implementation, caps on maximum
loans under the program, and limited funding for a vast pool of applicants, it is critical that these
smaller nonprofits (including many ESEs) have access to the Federal Reserve’s Main Street Lending
program.
ESEs need help now, like so many other businesses and nonprofits, that are being hit hard during the
COVID-19 crisis. ESEs operate in wide ranges of industries, including maintenance and landscaping,
retail, e-Commerce, warehouse and logistics, trucking, computer refurbishing, food service, consumer
packaged goods, recycling, and staffing industries, all of which have seen scaled back operations or
shutdowns, thus suffering major revenue losses. The closure of these organizations could eliminate
community assets that are a critically important part of economic recovery. These businesses can
rapidly reach the people in greatest need with productive employment and provide immediate
income.
For all these reasons, we urge you to expeditiously issue guidance expanding the Main Street Lending
programs to nonprofits.
Sincerely,
America Forward
Center for Employment Opportunities
Chrysalis
Goodwill of Central Texas
Goodwill of San Francisco, San Mateo and Marin
Goodwill Silicon Valley
Juma Ventures
Project Evident
REDF (Roberts Enterprise Development Fund)
Results for America
UTEC
Year Up
CC: Lael Brainard, Angela Ford, Ingrid Naylor, and Kipp Kranbuhl
DocuSign Envelope ID: 17FD71 19-D7D7-4F2D-A034-9A6565C07966
Revel Transit Inc.
68 3rd Street
Brooklyn, NY I 1231
April 16, 2020
The Honorable Jerome H. Powell, Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW
Washington, DC 20551
Dear Chairman Powell:
We appreciate t he Federal Reserve's announcement of the Main Street (new and expanded) Loan
Programs. We are submitting this letter in response to your call for comments on the programs. Our
goal is to ensure companies that need it can access t hese programs while also ensuring that there are
safeguards in place with regards to taxpayer funds.
Revel Transit Inc. (Revel) is a Brooklyn-based operator of shared electric moped services. Founded in
Brooklyn in March of 2018, Revel has grown its operations from a small pilot of 68 mopeds operat ing in
Brooklyn to over 1,300 mopeds in New York City (Brooklyn, Queens and Manhattan) and additional
fleets in Washington, D.C., Austin, Miami and Oakland.
We currently employ over 146 workers across four states and t he Washington D.C. territory. We have
been growing rapidly and, prior to the COVID-19 pandemic, had been anticipating significant additional
growth in the mont hs and years to come.
Our business, like that of many other companies, has been severely impacted by COVID-19. The demand
for our services has decreased significantly and our revenues have drastically declined as a result. In
response, we have taken necessary steps to cut costs and without additional funding, further
reductions may become inevitable in the coming months.
As it currently stands, Revel is not eligible to apply for either of t he Main Street Loan programs because
the programs require borrowers to have positive EBITDA. It is possible that t his requirement aims to
address the solvency requirements under Section 13(3) of the Federal Reserve Act. Unfortunately,
most start-ups cannot meet this test, but they regularly verify solvency with lenders, investors and
business counterparties by other means.
We t herefore recommend the following changes:
• EBITDA Test. We urge you to ensure that both Main Street Loan programs are available to
growing, entrepreneurial companies with negative EBITDA by focusing instead on maximum
loan amounts (i) as a percentage of enterprise valuation, (ii) determined by commonly accepted
debt/equity metrics on a per industry basis and/or (iii) as determined by the lending bank (who
DocuSign Envelope ID: 17FD7119-D7D7-4F2D-A034-9A6565C07966
Revel Transit Inc.
68 3rd Street
Brooklyn, NY I 1231
retains 5% risk) in applying reasonable underwrit ing criteria relevant to growth-stage
companies, such as cash on hand, revenue growth, existing debt, operating costs, gross margins,
etc.
Mr. Chairman, we appreciate the opportunity to provide feedback on the Main Street Lending programs
and are thankful for the Federal Reserve's efforts to support firms such as ours during this economic
crisis.
Sincerely,
oocuSigned by:
11
~ ~D~~;:6WlVJ
Cecile Abramowicz
General Counsel
cc: Congresswoman Nydia M. Velasquez
Jerome H. Powell
Chair, Board of Governors
Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551
April 14, 2020
Re: Comment on Main Street Lending
Dear Chairman Powell:
I am writing to you on behalf of Robin Hood, New York City’s largest organization focused on lifting
families out of poverty, to express our deep concern that large non-profit organizations with more than 500
employees are ineligible for the Federal Reserve System’s Main Street Lending program to stabilize
organizations impacted by the COVID-19 pandemic. Furthermore, no other lending facility has been
announced or implemented to comply with the CARES Act §4003(c)(3)(D) to support this vital sector of the
economy and response to this public health and economic crisis.
Nationally, non-profits contribute $900 billion to GDP and employ 12 million workers. These organizations
are critical to the emergency response, recovery, and economic stability of the country. Robin Hood funds
more than 200 organizations across New York City that operate food pantries, homeless shelters, settlement
houses, medical clinics, and other vital services for low-income New Yorkers who are being devastated by
the public health and economic consequences of the outbreak. In New York City, especially, non-profit
organizations are on the front lines of the pandemic response and may not survive the crisis’s economic
fallout, putting their continued service of the most vulnerable communities in jeopardy.
New York City’s non-profits employ 16 percent of the city’s private workforce. There are 3,000 health and
human service organizations that employ more than 40,000 people alone. Much of this workforce is
concentrated in non-profit organizations with more than 500 employees. According to Sea Change, a non-
profit merchant bank, roughly 50 non-profits represent $2.8 billion (about 50 percent) of New York City’s
$5.8 billion in annual social service spending with non-profit partners1. Yet these organizations have very
low levels of financial reserves (below two weeks in some cases), limited access to credit, and need access to
emergency loans that the Federal Reserve can and should make available to them through banks and other
lenders.
The Treasury Secretary is tasked with creating a program granting loans to nonprofits and other entities that
charge an interest rate of no higher than 2% and that would not accrue interest or require repayments for at
least the first six months. The Main Street Lending Facilities announced by Treasury and the Federal
Reserve on April 9th does not satisfy the legal mandate from Congress.
As Treasury Department and the Federal Reserve work to create a program as directed under §4003(c)(3)(D)
providing financing to banks and other lenders to make loans to non-profits and other mid-size business of
1 http://gd7xi2tioeh408c7o34706rc-wpengine.netdna-ssl.com/wp-content/uploads/2020/04/Too-Big-To-Fail.pdf
up to 10,000 employees, we believe the program must include the following terms that satisfy the dictates of
the CARES Act:
• Include an interest rate of 0.50% (50 basis points) for 501(c)(3) charitable nonprofits at a 5-year
amortization
• Provide priority to 501(c)(3) charitable nonprofits responding to COVID-19 relief efforts and require
lenders to make a proportionate number and value of loans to nonprofits to prevent the crowding out
that is being seen in the Paycheck Protection Program
• Set a certain date for when employee retention provisions should begin
• Payments shall not be due until two years after a direct loan is made
The very existence of non-profits at the forefront of the crisis response and eventual recovery efforts is at
stake. We urge the Federal Reserve to meet this emergency need in compliance with the CARES Act. Thank
you for your leadership and commitment to the nation at this critical moment.
Sincerely,
Wes Moore
CEO
SBIA
SMALL BUSINESS
INVESTOR ALLIANCE
April 16th, 2020
The Honorable Steven Mnuchin The Honorable Jerome Powell
Secretary Chairman
U.S. Department of the Treasury Board of Governors of the Federal
1500 Pennsylvania Avenue NW Reserve System
Washington, DC 20220 20th St. and Constitution Ave. NW
Washington, DC 20551
Re: Main Street Lending Program
Dear Secretary Mnuchin and Chailman Powell:
On behalf of our members, the Small Business Investor Alliance (SBIA) appreciates the ongoing
work of the Federal Reserve and Treasury Department ("Treasury") in responding to the
unprecedented economic disruption caused by the COVID-19 pandemic. SBIA is a national
association that develops and advocates policies that enable capital investments into Ame1ican
lower middle market business. Our membership includes funds electing to be regulated as Rural
Business Investment Companies (RBIC), Business Development Companies (BDCs) under the
Investment Company Act of 1940, private capital funds, Small Business Investment Companies
(SBICs), and similar funds that serve the lower and middle market.
The economic stoppage caused by the pandemic is unprecedented in American history and has
hit the portfolio companies of our membership particularly hard. Until the shutdown, these were
the economic drivers ofjob creation and the future of the American economy. The extraordinruy
steps taken by Congress, the Federal Reserve, and Treasury ru·e necessru·y to provide liquidity to
businesses that were healthy before this crisis hit. Saving these economic engines will be critical
to reactivating the economy and getting Americans working again.
The SBIA welcomed the April 9th announcement regarding the establishment of the Main Street
Lending Program (MSLP), which will consist of the Main Street New Loan Facility (MSNLF)
and Main Street Expanded Loan Facility (MSELF). The MSLP will complement the already
existing Paycheck Protection Program (PPP) by providing credit to middle market businesses
that employ over 60 milJion Ame1icans and who are largely unable to access the PPP.
The SBIA surveyed our membership to learn how accessible the initial terms of the MSLP would
be for our members' portfolio companies, and what changes are necessary to ensure that middle
market companies ru·e able to obtain the liquidity necessa1y to see them through this crisis. As a
general matter, we beUeve the terms of the MSLP should reflect the reality that many of these
smaller businesses were not able to receive conventional bank capital because they were asset-
light, rooted in the service economy, or had financing structures and time ho1izons that were
outside of the vanilla norms of conventional banking. The MSLP should be readily available to
all American small and medium-sized businesses that are fighting to survive and to maintain
their employees - including those for whom conventional banking services may not have been
readily available even before this shutdown.
Based upon the results of our survey, the SBIA urges the Federal Reserve and Treasury to adopt
the following amendments to the MSLP before it goes live:
• The current leverage limits for MSNLF (4x EBITDA) and MSELF (6x EBITDA) are too
low and will shut out many lower and middle market businesses from accessing the
facility. We believe these levels should be raised to 6x EBITDA for the MSNLF and 8x
EBITDA for the MSELF to more accurately reflect the balance sheets of these
businesses.
• Since most non-bank lenders and smaller companies typically do not utilize unadjusted
EBITDA, the MSLP should allow for use of"adjusted" EBITDA, which permits
customary add-backs and non-cash items.
• Earlier stage businesses that are unable to access the PPP because of affiliation rules may
have generated insufficient EBITDA to access MSLP capital to save their business and
protect their employees.
• Allow non-bank lenders, including Business Development Companies (BDCs) electing
Regulated Investment Company status as set fo1th in the Internal Revenue Code Sec.
851(a)(l)(B) to be treated as "eligible lenders" under both the MSNLF and MSELF. The
existing terms leave out many middle market businesses that rely on nonbank lenders for
credit.
• The definition of an "eligible loan" in both the MSNLF and MSELF should be expanded
to include loans made by entities electing Regulated Investment Company status as set
fo1th in the Internal Revenue Code Sec. 851(a)(l)(B).
• Restrictions on dividends and stock repurchases under section 4003(c)(3)(A)(ii)(I) of the
CARES Act should not be automatically applied, given the need for middle market
businesses to attract and retain investors, and that both retail and institutional investors
rely on the income generated from dividend payments as explained in greater detail
below.
• At a minimum, the terms related to dividend restrictions should reflect the uniqueness of
certain investment structures and pass-through entities (which make tax-related
distributions to shareholders).
• Finally, in order for the Main Street Lending Program to achieve its intended goals, we
urge Treasury and the Federal Reserve to issue updated guidance that allows ce1tain
entities to continue to pay dividends to investors. Among other requirements, BDCs are
required to pay out at least 90 percent of their taxable income in the form of investor
dividends. BDCs should not be disqualified from access to programs or facilities
providing direct loans simply because they elect to pay out 90 percent of their taxable
income, which ultimately goes to benefit individual investors, including in their 401(k)
plans.
Regulators should allow BDCs, their portfolio companies, and other similarly situated entities to
continue to serve businesses in the middle market and help sustain our economy through this
unprecedented disruption.
We respectfully urge the Federal Reserve and Treasury to issue updated terms that reflect these
changes so that the portfolio companies of our members can weather this unprecedented crisis
until they are able to fully operate once agai n. The SBIA commends you for your leadership and
is ready to assist in any way that we can.
Sincerely,
/?.~/~
Brett Palmer
President
Small Business Investor Alliance
Secured Finance MANAGEMENT COMMl...,.EE
Network PRESIDENT
JOHN DEPLEDGE
BANK LEUMI USA
FIRST VICE PRESIDENT
JEFFREY GOLDRICH
NORTH MILL CAP ITAL LLC
VICE PRESIDENT - FINANCE
PETER YOR K
J.P. MORGAN SECURITIES LLC
CO-GENERAL COUNSEL
JONA THAN HELFAT
OTTERBOURG P C.
CO-GENERA L COUNSEL
RICHARD KOHN
GOLDBERG KOHN LTD.
CEO & SECRET ARY
RICHARD GU MBRECHT,
SECURED FINANCE NETWOR K
AprH 15, 2020
Via Email:
The Honorable Steven T. Mnuchin
Secretary
U.S. Depa1tment of the Treasury
1500 Pennsylvania Avenue, NW
Washjngton D.C., 20220
The Honorable Jerome H. Powell
Chairman
Federal Reserve System
20th Street and Constitution A venue, NW
Washington, DC 20551
RE : Response to Main Street Lending Program Guidance
Dear Secretary Mnuchin and Chairman Powell:
I am writing on behalf of the Secured Finance Network (fo1merly known as the Commercial Finance
Association) ("SFNet"), representing the $4T secured finance industry to respond to the request for
comments and suggestions to facilitate the objectives of the Main Street Expanded Loan Facility and
the Main Street New Loan Facility as set out in last Thursday's publication by the Federal Reserve
(the "Programs").
SFNet congratulates and supports the extraordinary and groundbreaking efforts being undertaken by
the United States Treasury Department and the Federal Reserve Board to provide capital to
companies impacted by these unprecedented times. However, it is our belief that the majority of
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potentially Eligible Borrowers who would benefit from the Program have existing
secured/collateralized debt so it is critical that the Program specifically address the relationship
between these existing secured loans and the additional loans provided for in the Programs in order
to meet its stated objectives.
SFNet is a trade organization founded in 1944 representing depository and non-depository lenders
engaged in asset-based lending, factodng, trade and supply chain finance with 1,000 member
organizations throughout the United States. Our network of secured lenders, finance companies,
service providers and others do the essential work of providing capital that fuels our nation's
economy.
The secured finance industry underpins, either directly or indirectly, about one-fifth of the
transaction volume that makes up the $20 trillion US gross domestic product. We estimate the
number of those directly employed in either providing or suppo1ting secured financing activity is
approximately 60,000 individuals at over 5,000 commercial banks and another approximately 1,500
non-depository lenders across the US.
Secured transactions provide financing to over 1 million US commercial entities, ranging from
single-employee films to large corporate and public enterpdses. Roughly one-third of the
approximately 4.6 million firms in the US with at least two employees directly feel the impact of
secured finance. And the benefits affect not only the enterprises, but also more broadly their
employees, customers, communities and the economy as a whole.
As you prepare to implement regulations in suppo1t of the Program, we urge you to consider the
following recommendations in order to integrate the potentially Eligible Bon-owers' pre-existing and
future secured loans into the Program.
1. Allow for non-depository lenders to be Eligible Lenders under the Program. This community
provides well in excess of $100B in capital to the small and middle market businesses which
the Program is intended to protect with most of these loans being secured by the borrower 's
collateral. Failure to include these critical sources of funding would materially limit
accessibility to the Program facilities for Potential Bo1rnwers for the following reasons.
a. Existing Potential Borrowers who have existing secured loans from non-depository
lenders would now be forced to re-affiliate their lending relationship and their
existing facilities with a new depository lender dming a crisis environment and who,
at the same time, are trying to service their existing borrowers under the Program
facilities making it unlikely or causing long delays before the Potential Borrower
would able to enter into a Program facility, if at all.
b. Allowing the non-depository lenders to be Eligible Lenders would minimize the
integration between the existing or future secured loan and a Program facility as it
would be handled by just one institution.
c. These non-depository lenders are, for the most part, well capitalized and enjoy unique
skills and expe1tise in servicing middle market borrowers and would therefore
expedite the process of achieving a Program facility.
2. As the Eligible Borrower in most instances already has secured or possibly unsecured lines of
credit in existence at the time the Program facility is being provided, it is imperative that it be
a requirement that the SPV "participant" not be allowed to cancel, amend, modify or reduce
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any existing lines of credit and that upon a default under the pre-existing credit facility by the
Eligible Borrower the rights and remedies of the pre-existing lender are not adversely
affected or othe1wise modified, amended or vitiated with respect to the terms of the
applicable pre-existing credit facility.
3. In order to facilitate the implementation of the Programs, and for ease of execution and
certainty with regard to preserving the existing tenns of the current capital structure and loan
facilities of an Eligible Borrower, the guidance for the Programs should expressly provide
that the rights of the government SPY are as is customarily provided to a "participant" rather
than as a direct lender such that the SPY will be a purchaser of an interest in the loans made
by the Eligible Lender, the SPY is not in privity with the Borrower, and the Eligible Lender
may manage the lending relationship, including with respect to amendments, waivers and
other aspects of the administration of the facility, including as to the assignability of the
Eligible Lender's debt and for purposes of dealing with other creditors of the Eligible
Borrower.
4. In order to facilitate the Program' s aims provide that the Eligible Lender does not make any
representations or warranties, and has no liability to the SPY participant, with respect to the
value or collectability of the debt or any collateral, the information provided by the
Borrower, pe1formance of the Borrower under the credit facility, the financial condition of
the Borrower and similar matters and actions of the Eligible Lender taken in the
administration of the credit facility in its reasonable judgment.
5. For a revolving asset-based credit facility, the proposal that the te1m loans made under the
Main Street Expanded Loan Facility be pru·i passu with the revolving loans made by the
lender will actually reduce the amounts available to the Eligible Borrowers rather than
increase them, which is obviously the exact opposite of the purpose of such Program.
Without clarification this will be a significant adverse unintended consequence. The asset
based lender determines how much credit it can make available to a borrower for its working
capital based on the ability to be repaid from the sale of the collateral first. For any debt that
shares that position, as is proposed for the Expanded Loan Facility, the asset-based lender
will because of the fundamental mandate of the product, reduce the amount it will lend by the
amount of such debt. Therefore, the Program needs to expressly shift the priority of the
repayment of the participation by the SPY.
6. Allow Eligible Lenders to continue to use LIBOR for some period of time before being
required to use SOFR. The transition to SOFR is not anticipated until January 1, 2022 and
banks have not yet established appropriate processes and controls around the new reference
rate.
Uncertainty as to the protections available to secured ]enders under the Program may lead to a failure
among some potentially Eligible Borrowers or potentially Eligible Lenders to participate in the
Program facilities or restrict their participation. These negative consequences would have a direct
impact on these potentially Eligible Borrowers by limiting access to this critical source of capital,
imperiling jobs and jeopardizing economic recovery. The benefit of claiifying and amending these
protections, as suggested above, would, in our opinion, mitigate the current economic hardship being
experienced by Eligible Borrowers and bolster this critical pru·t of the capital supply chain.
6 10083 1.2
Thank you for your consideration of our concerns and for your continued support of our country
during these unprecedented times. If you have questions regarding this urgent request for critically
needed action, I may be reached at rgumbrecht@sfnet.com or 212.792.9391.
Respectfully,
Richard D. Gumbrecht
CEO
Secured Finance Network
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April 16, 2020
The Honorable Addison Mltcheli McCon'i11ell, Jr.
united Sta'ies Senate
Washlngto'.n, OC 205'10
Dear Leadet McConnell,
Thank you for your ongo-lng e,ffo'11is to deliver mgently neMed assistahee to Ametiica's
working families and businesses in respons·e to the •toron·avirt.Js crisis, ana for your
extraordinary efifort to negoliate snd pass the historfo and critic-al Coronav:rrus Aid,
Re.lief, and Economic Security (CA~!=$) Acl. As the Treasury crafts guidance to
Implement the Mairi Street Le1ndi'ng Program (MSLP} as part of tfile CARES Act. we
respeatfiuiiy ask you to help secure coverage for as many U.S. smail to medium sized
businesses and employee.s as possib'le. ,I had tornhilent s .submitted directly to the
Fede:ral Reserve and have endosea therfl with this letter for your 1reference.
We are concerned tthat many small lo medium sized U.S. businesses (including
!Lexmark) will be prevented from 'fully benefiting under the MSLP rbecause of dhe Mait1
'Street Expanded Loan Facility's (MSELF) term loan requirement. According to the
MSELF Term Sheet, to quaHfy as an eligible borrower, the cornpa:ny must current'ly
have a term loan outsl arndlng with an eligible lender. While it is understanda'ble that
adding ,on to a current credit relationslilip is l ess risky than prov.iding a loan to a ·new
borrower, it is not clear why a 'term loa·n, and not an ,exist<i11g ,credit line, letter of credit,
,credit facility, or other 'form of lending, 1is lhe o:nly means to qualify for participating in
the MS ELF.
1
The term loan requIirement win prevent many U.S. small to medlum 'sized businesses
:that meed reli'ef loans rgreater than tihe -$2:5 miiliorn cap forlhe Main Stre,et New Loan
IFactMy from obtaining larger loans under the MSLP. Lexmar1(, with .2.,000 US-b·ased
1
emph,yees, is exactiy the kind of business the IMSLP ts in'iended to help. We have
suffer~d a lhu,ge loss of bus ir1e-ss due to COVI D-19 and related dis'ruptions to economic
1
activity and t"reetl mote than $25 million in government -assistance to get Us through tihis
crisis and avoid painful layoffs. We have an ~xistihg treda line with ain eligibie iender,
but we are prevented from obtaining a loan under the MSELIF because we do n·ot have
a term loon,
Clearly, the principles urrderlying know-your-custromer polkies and traditional er.edit
evaluation may favor hig!her caps or limitatio:ns om avai'lable loans lo bt)rrowers who
have ,existing relationships with federally insured ,depository iir1stitutiorns. However,
limiting tinose rable to partloipate in t:he MS~lF by 1requi.ring the ,exlste.nce of a term loan
:rather than other forms of credit unnecessarily restricts the p:ro,gram's ability to assist
businesses that are in need during ~his time ,of cliisis. Lexmark would greatly appreciate
it it you could he~rp correc1this iin the implementation regulation language so that it
would make it clear tlilat a term loan wrn not be the only path <to relief for companies
needing more than $25 milMon, and that other credit facilitles can ,also be rused.
fhank you for he1ping Lexmark remarn a strong part of the Kentucky economy and
commun'ity.
(l\~j \. ~
~ \AJ~ -----
Allen Waugerman Le><ma,k lntema: : ~ 1.8S9.825.4744
President & Chief Executive Officer 740 Wes\ New Circle Road allen. waugerma n@lexmark.co m
Lexington, KY 40550 lexmark.com
USA
The economic shutdown related to Covid-19 has been devastating to a number of our clients,
who need CARES Act relief. Given their size and the loan amounts they need, the only program
available to many is the Main Street Expanded Loan Facility (MSELF). However, as currently
described in the Term Sheet, several cannot participate in the MSELF because they do not have
a term loan outstanding with an eligible lender. They do, however, have other forms of credit,
such as lines of credit or credit facilities, with eligible lenders. The term loan qualification to
participate in the MSELF unnecessarily restricts the program’s ability to assist businesses that
are in need during this time of crisis. A term loan should not be the only form of credit that
permits an eligible borrower to participate in the MSELF. Letters of credit, credit facilities, credit
lines and other forms of lending with an eligible lender should also allow an eligible borrower to
borrow under the MSELF. Clearly, the principles underlying know-your-customer policies and
traditional credit evaluation may favor higher caps or limitations on available loans to
borrowers who have existing relationships with federally insured depository institutions. But,
these same principles apply to all types of credit, not just term loans. Therefore, by requiring
the existence of a term loan with an eligible lender, rather than any other form of credit, the
MSELF is unnecessarily limiting the amount of support that will be given to small and mid-sized
businesses, a direct contradiction to its stated goal to “enhance support for small and mid-sized
businesses” and help “businesses keep their workers on payroll.”
SHIFT
April 16, 2020
The Honorable Jerome H. Powell, Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW
Washington, DC 20551
Dear Chairman Powell:
We appreciate the Federal Reserve's announcement of the Main Street (new and expanded)
Loan Programs. We are submitting this letter in response to your call for comments on the
programs. Our goal is to ensure that start-ups like ours can access these programs while also
ensuring that there are safeguards in place with regards to taxpayer funds.
Shift Technologies, Inc. (Shift) is a multi-city West Coast online auto retail company. Our aim is
to make the used car industry consumer-friendly by making the purchase or sale of a used
vehicle simple, fair, and accessible to all. Despite our small size relative to the larger legacy
auto retailers, we are becoming a leader in this space, with over 11 ,000 vehicles sold in 2019
and a ential Business Information
We currently employ over 350 workers in the United States and through our contract
relationships have created hundreds of more jobs domestically. We have been growing rapidly
and, prior to the COVID-19 pandemic, had been anticipating significant additional growth and
domestic, low-to-med skilled job creation in the months and years to come.
Like thousands of other companies around the United States, Shift has found itself in an
unprecedented situation as a result of the economic crisis being caused by COVI D-19. The
collapse in demand for vehicles is having a severe impact on our revenues and putting the jobs
of our employees and the company's future at risk. It is critically important that our employees
and their families have access to fast and effective government support to help our
communities cope with the unprecedented challenges we are all facing. And while we have
stretched as far as we can to avoid implementing lay-offs to date, it is also critical that, as an
employer, we obtain alternative sources of liquidity.
As it currently stands, Shift is not eligible to apply for either of the Main Street Loan programs
because the programs require borrowers to have positive EBITDA. It is possible that this
requirement aims to address the solvency requirements under Section 13(3) of the Federal
Reserve Act. Unfortunately, most fledgling businesses cannot meet this test, but they regularly
verify solvency with lenders, investors and business counterparties by other means.
The ecosystem built around high growth technology businesses or companies that are utilizing
Doc ID: 833791ac42bee5becbebca83fa04bft2063d61 a5
technology in novel ways, like Shift, has been at the forefront of economic growth in the U.S., for
nearly 40 years. Profitability is not a useful metric to measure the societal value and job creation
potential of these companies that are investing their equity resources into growth. Without
ensuring that high growth technology-driven companies investing in R&D to the detriment of
EBITDA have access to capital like other businesses during this crisis, we set up a situation that
could cede America's leadership in innovative technology to countries where such support has
been more forthcoming, including China. That has obvious long-term detriments to our country
that we should aim to avoid.
We therefore urge you to eliminate the positive EBITDA test and ensure that both Main
Street Loan programs are available to growing, entrepreneurial companies with negative
EBITDA by focusing instead on maximum loan amounts (i) as a percentage of enterprise
valuation or (ii) determined by commonly accepted debt/equity metrics on a per industry
basis.
Mr. Chairman, we appreciate the opportunity to provide feedback on the Main Street Lending
programs and are thankful for the Federal Reserve's efforts to support firms such as ours
during this economic crisis.
Sincerely,
George Arison, Co-CEO
Toby Russell, Co-CEO
Amanda Bradley, Head of Legal
Doc ID: 833791 ac42bee5becbebca83fa04bff2063d61 a5
Thursday, April 16, 2020
The Honorable Jerome Powell
Chairman
Board of Governors of the Federal Reserve System
20th Street & Constitution Ave., NW
Washington, DC 20551
The Honorable Steven Mnuchin
Secretary
U.S. Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, DC 20220
Dear Chairman Powell and Secretary Mnuchin:
Ref: An Urgent call to action: Saving our small and middle market businesses, and our economy, by
focusing on solutionsfor diverse businesses, including Latino, African American, Asian American,
Disabled, Veterans who represent approximately halfofsmall and middle market business owners in
the country.
Dear Madams and Sirs:
My name is Monika Mantilla, and I am a Managing Partner at Small Business Community Capital ("SBCC"), an
SBIC Impact Fund. I'm also the CEO at Altura Capital Group. I was born in Colombia and came to this country
27 years ago following a dream. I first had a working visa and then became a proud US Cit izen. I have a law
degree from Universidad del Rosario, Bogota Colombia, and an MBA from Columbia Business School, which
tuition cost was paid by the company I worked for. This education and this amazing country have granted me
the opportunity to maximize my potential. My deepest desire is to serve my country through my profession
as an investment manager, and as a business growth advocate.
I've dedicated the last 25 years of my life to building financial capacity in underserved communities, which
often consist of low- or moderate-income ("LMI") persons or areas. I am also on the Board of a number of
industry and business organizations that advocate for small and minority entrepreneurs. Invest ing in them
and helping them grow and succeed is my passion. These times of crisis require all the support we can
provide to small and middle market business, and t o allow banks and ot her valuable capital providers to
invest in qualified activities that advance our communities and our economy, especially those underserved
and with high potential.
Our passion for helping underserved small businesses is demonstrated by our SBCC fund's LMI and Small
businesses successful investment metrics:
• LMI Enterprises - Currently 62% of our SBIC Impact Fund invest ments have been invested in LMI
Enterprises.
• Diverse Entrepreneurs - We recognized that underinvestment in women and minority-owned
businesses by peers in the SBIC program represented (and still represents) a tremendous
opportunity. In 2018, minority-owned businesses received only 4.8% of SBIC Financings and women
owned businesses received only 2.2% - continuing to demonstrate that the market fails to recognize
1
the value of these companies. By specifically seeking out opportunities to invest with diverse
entrepreneurs, we sought to take advantage of this gap. To date, 60% of our investments have diverse
ownership, and 90% have counted minorities or women in ownership roles.
• High Quality Job Creation - SBCC believes that a successful small business lies at the core of addressing
people's educational, housing, healthcare, and financial stability needs and aspirations, all while
building a more inclusive society. Moreover, we have experienced firsthand that sustainable small
business growth comes as a result of employees that feel valued by and invested in their company -
not at their expense. Our LPs ask us to track certain job quality and creation metrics across all of our
portfolio companies, and we are proud to report that according to our most recently available data,
SBCC's portfolio companies support 427 jobs and have created 47 new jobs since inception. Moreover,
as of year-end 2018, full time employees at our portfolio companies saw 88% of their healthcare
premiums covered by their employers, 100% received supplemental benefits including dental,
disability, life insurance, maternity/paternity leave, and retirement savings plans.
Sixteen years ago, I was invited by the United States House of Representatives to present to them my views
regarding Latinos in financial services. At that time, I thought that we had two angles to share: Latinos as
financial service users, but also as financial service providers. It was then that I created a commitment to help
build financial capacity in minority communities to enable business owners maximize their growth potential.
A lot of work still awaits us, but I know the demographics shifts that are happening in our country require
that all communities become active economic players and contributors. Meritocracy and access to
opportunity is the biggest strength of our country. Fifteen years ago, I lead and co-wrote a white paper about
Hispanics in Financial Services. It was an attempt to map out what needed to happen for Hispanic American
to step up to their role in the asset management arena. We have experienced great progress but at the same
time we are still behind in numbers, both of Hispanic asset managers, MD l's, community banks and CDFI
owners or managers, and the assets we manage. However, I believe the incredibly rich entrepreneurial
strength of our community will allow for significant Hispanic money managers to flourish. A great example is
Jose Feliciano from Clearlake Capital who in the middle of Covidl-9 closed, this week, a $7 billion fund,
managing $18 Billion. Ten years ago, I became the first Latina to ever receive the Hispanic Business Award by
the Hispanic Heritage Foundation. The then US Treasurer bestowed me such an honor. I then gave a speech
that still informs my thinking: the dream that we could be architects of our own solutions. Six years ago, I
wrote a paper that was t itled "What we need to do about capital". I also attempted to design the
architecture that was needed to significantly advance the Capital Agenda in underserved communities. My
ideas around this subject have evolved but in some ways continue to be the same: provide capital to the
prepared and capable entrepreneur, driven by discipline and clear principals, help her/him grow his/her
business, facilitate her/his path to success, and open him/her opportunities with Corporate America and
Government. That recipe has proven to us again and again to be a winning recipe to achieve above market
returns and societal transformation. Two years ago, I did a Ted talk style presentation at USHCC Legislative
Summit about closing the $1.4 trillion gap. Recently I ended a Chapter in the soon to be published book
"Advancing US Latino Entrepreneurship", about the fastest growing segment of businesses in the country.
also have been part of the Aspen Latinos in Society working group. We recently published a playbook to help
Latinos scale.
Thirteen years during the last recession our Company Altura Capital helped successfully co-manage to
significant programs: The Capital Purchase program, CPP, and the Public Private Investment Program, PPIP,
that helped salvage the CMBS RMBS market. It was an extraordinary opportunity to help our country and
deliver great performance and financial returns to the US Treasury, the Federal Reserve and Institutional
Investors. These programs taught us important lessons of how public private initiative could work effectively
to reestablish and rebuild markets.
2
I've been in Finance for 20 years, prior in operations and business management for 9 years, and before as
lawyer.
Navigating through CovidWar times
As we help our portfolio and network companies navigate liquidity and reinvent themselves during these
times of challenge, through multiple town halls and virtual sessions we have been in close contact with our
industry partners, a large group of business owners, and industry associations. Our goal has been to help
companies navigate through these times of turbulence w ith management tools and all the resources we can
provide, and assess their liquidity issues and possible short, mid and long-term debt and equity solutions.
Given our role as an SBIC Impact fund, where we manage $148 million and have access to $750 million in co
investment dollars, our relationship with large Institutional investors and financial institutions that back our
work, our visibility on liquidity challenges of approximately 8 million businesses that in aggregate represent
approximately $1.4 t rillion in annual gross receipts through the organizations we belong to, collaborate with
and help lead (including the Stanford Latino Entrepreneurship Initiative, the United States Hispanic Chamber
of Commerce, the Billion Dollar Roundtable, Impact Capital Managers, the Aspen Institute and NMSDC) and
our experience on the last recession effectively managing TARP programs (both CPP and PPIP), we believe
our perspective can be invaluable and helpful.
The sentiment we gather from the market we so actively participate in is that there is a deep desire to go back
to work, to go back to productivity. We also understand America needs to become a much stronger
manufacturer, and that we need to find a way to effectively compete with China. The only way we will be able
to do that is through making our manufacturing fixed costs more competitive. That is the only way to level the
playing field.
My feedback
I am grateful for the opportunity to provide feedback and perspective regarding the Main Street New Loan
Facility and Expanded Loan facility.
1. My first comment is that this facility should not be restricted to banks. It should be open to all debt
providers, or at least a group of them that fulfill certain qualifications, for example at least $100
million in AUM, as where the minimum levels of AUM during the last recession. Some of our
institutional investors are banks, and we get to work with them frequently. Banks by design and due
to regulatory restrictions can only take certain risks that we as private lenders can address in a much
more proactive and flexible way. Restricting private debt funds to participate will significantly narrow
the distribution channels and the opportunity for many firms to receive the patient capital they
need, and the value added that alternative lenders like us can provide. Our hands-on approach and
effective shepherding allow us to be value added investors. The times we are living definitely call for
these types of hands on capital providers to lend their expertise and support.
Our goal is to serve as a catalyzer to reactivate the economy and avoid further job losses and
business downturns, while providing effective tools to valuable enterprises across all sectors
including manufacturing, healthcare, retail and consumer so they can continue to compete, reinvent
themselves and thrive. The rebuilding that will need to happen in our country is massive, and we
3
need to activate all sectors of the economy to ensure we recover as fast and effectively as possible
and achieve long term growth and prosperity, while supporting the most vulnerable.
2. Public Private Initiative to assist the most vulnerable: Taking advantage of this valuable opportunity
to share our view of the current market. I must present to you a deep concern regarding our most
vulnerable communities across America. The PPP solutions have yet to arrive to a vast portion of our
communities. It is imperative that the next batch of legislation somehow channels these resources
effectively and especially to the most vulnerable. I have painfully had conversations with hundreds of
business owners who have severely felt the effects of significant revenue losses, yet have very thin to
no savings and are in dire need to receive support to be able to put food at the table and to pay their
employees so they can put food at the table. According to a Pew Research Center survey conducted
March 19-24, the need is dire and real. This is why a group of us entrepreneurs from finance,
technology, marketing and advertising have created a mechanism to solution to raise assets, develop
an elegant fin tech solution and distribute resources. The initiative is called LendaMano, a lending
hand. It aims to target the most vulnerable business owners around the country. We are happy to
share detailed information via zoom at your earliest convenience. We are expecting to launch within
the next 10 days in the Tri-state Area, one of the most hardly hit by Covid-19, and then LA, then Texas
and Florida and then national. We would truly welcome the support from the Federal Reserve to match
3 dollars for every 1 dollar we raise, up to $11.1 billion the resources we rally from the private sector,
and to invite banks and their foundations to support us by granting them CRA credit. This would allow
us to provide 30-day advance money to 200,000 business owners that make anywhere between
$24,000 to $2,000,000 a year.
3. Public Private Initiatives to ensure the short, medium- and long-term liquidity for vibrant and
resilient small and middle market businesses
Having had the experience of assisting US Government to manage the allocation of resources both
during normal market conditions and during times of recession, there are lessons, contrasts and
differences to the existing challenges. I would like to focus my comments to what I believe in this
moment is most needed: ensuring the short, medium- and long-term liquidity for vibrant and
resilient small and middle market businesses.
Below please find 3 specific programs we propose that would address specific capital needs for small
and midsized business owners:
a) Provide asset managers (including minority asset managers) the funding to offer
innovative solutions and provide short term liquidity, mid-term liquidity and long-term
debt and equity investment vehicles for small and middle market business. This should
include the creation of a meaningful allocation of at least $SO billion through a
public/private initiative that can raise another $25 billion in private dollars, managed or led
by minority and diverse managers in partnership with other non-minority partners, so that
they can deploy this capital by making both debt and equity investments in diverse
businesses across the country. This program could be supported by all the Diverse business
organizations that provide technical assistance and exposure opportunities for diverse
entrepreneurs to work with both government and Corporations. I will be happy to present a
detailed proposal.
4
b) A Public Private Partnership to promote Manufacturing in America. Given the desired shift
to manufacture healthcare products in America, that a program is designed to provide
Private equity Funds and investors and SBIC funds the ability to access "Promote
Manufacturing Relief Dollars" for long term investments, for companies that commit to
employ at least 50 employees. These dollars would be 2x the amount of Private dollars, up
to $50 million per investment.
c) Coordinate with the SBA so that SBIC funds are granted the opportunity to access fast
additional lx leverage, asset relief capital at the rate of 1 x leverage, alongside relief equity
capital, and micro-sbics can be created by utilizing a "mothership" mentoring model.
4. Public/Private Initiative to ensure that small and middle market businesses can sell to
government in a more expedited manner. Ensure that all Corporations bring along a meaningful
participation/N partners that is diverse owned.
5. Ensuring Participation of diverse organizations both as solution providers and beneficiaries of
programs: Ensure that CDFl's, community banks, small and regional banks, credit unions, minority
depositary institutions and diverse asset managers, all an important part of the financial system that
will help address small business financing. Our recommendation is that they are activated and
provided adequate expedited licensing and funding to act as effective sources both short term relief
and longer-term liquidity, equity and debt solutions and financing solutions for both the businesses
and the non-profits (both 501 c6 and 501 c3s) for our communities. Speed of solutions is key.
Mainstream IS Multicultural
Diverse communities in America play a central and mainstream part of the economy. According to Latitude,
six million immigrant workers are at the frontlines keeping U.S. residents healthy and fed during the COVID-
19 pandemic. This number includes 29% of all physicians and 38% of home health aides. This number also
represents the significant shares of workers cleaning hospital rooms, staffing grocery stores, producing food
and so much more. Latinos make up a significant number in this group. We are grateful for the talent and
diversity in the United Sates, and we are grateful for all the unsung heroes. We salute you each day for your
bravery and hard work.
Acording to Nielsen, " Multicultural consumers are the fastest growing segment of the U.S. population.
Already over 120 million strong and increasing by 2.3 million per year, multicultural populations are the
growth engine of the future in the United States. Hispanics, African Americans, Asian-Americans and all other
multicultural already make up 38% of the U.S. population, with Census projections showing that multicultural
populations will become a numeric majority by 2044....Further data from the U.S. Census American
Community Survey shows that between 2006 and 2014, multiple race populations grew 77%, while NHWhites
in multicultural households increased by 30%. This indicates a stronger opportunity through proximity for
cultural sharing and blending that increases the pool of consumers with a multicultural mind set".
According to MBDA there are 8 million minority owned firms in the country, a 38% increase since 2007. 11%
of minority owned firms have paid employees, compared to 22% for non-minority firms. Minority owned
firms generate 1.4 trillion annual gross receipts (with top industries being wholesale $297 billion, retail $278
billion, professional scientific and tech $121 billion, healthcare and social assistance $118 billion,
accommodation and food services $115 billion, construction $90 billion, manufacturing $80 billion,
5
transportation $59 billion, administrative support, waste management and remediation $57 billion and real
estate and rental leasing $38 billion) and employ 7.2 million people.
We stand ready to be of assistance during these times in which we all need to come together t o build
meaningful solutions for our country and our economy.
I can be reached at 6462074836 or through this email.
I thank you for the opportunity to share my perspective and vision around practical solutions.
I stand ready to work with you.
Sincerely yours,
Monika Mantilla
Managing Partner Small Business Community Capital
CEO Altura Capital
Board member USHCC, Chair USHCC Foundation
Board Member Stanford Latino Entrepreneurship Initiative, Lban
Capital Advisor to the Billion Dollar Roundtable
NMSDC Certified
Aspen Latinos in Society working group member
Committed Citizen
6
I I
·,----
SON DER
I I
April 15, 2020
The Honorable Jerome H. Powell, Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitut ion Avenue NW
Washington, DC 20551
Dear Chairman Powell:
We appreciate the Federal Reserve's announcement of the Main Street (new and expanded) Loan
Programs. We are submitting this letter in response to your call for comments on the programs. Our
goal is to ensure companies like ours, in the start-up hospitality industry, can access these programs
while also ensuring t hat there are safeguards in place with regards to taxpayer funds.
Sonder Hospitality USA Inc. (Sonder) is a San Francisco-based hospitalit y start-up. Our aim is to be the
next-generation global hotel brand that operates hotels, apartments and villas and other types of
accommodations. Sonder is the global market leader in this space, with over $2.6 billion worth of real
estate under management and aConfideiitial Business lnfoimation
We currently employ over 700 workers across 17 states and almost 1000 workers around t he world. We
have been growing rapidly and, prior to the COVID-19 pandemic, had been anticipating significant
additional growth in t he months and years to come.
Like thousands of other companies around the United States, Sonder has found itself in an
unprecedented situation as a result of the economic crisis being caused by COVID-19. The collapse in
demand for hotel rooms is having a severe impact on our revenues and putting the jobs of our
employees and t he company's future at risk. It is critically important that our employees and their
families have access to fast and effective government support to help our communities cope with the
unprecedented challenges we are all facing. It is also critical that, as an employer, we obtain alternat ive
sources of liquidity.
As it currently stands, Sonder is not eligible to apply for either of the Main Street Loan programs
because t he programs require borrowers to have positive EBITDA. It is possible that this requirement
+1 (617) 300 0956 sonder.com
101 15th Street, San Francisco, CA 94103 Taking Stay Further
-- I
.• I
SON DER
I I
aims to address the solvency requirements under Section 13(3) of the Federal Reserve
Act. Unfortunately, most start-ups cannot meet this test, but they regularly verify solvency with lenders,
investors and business counterparties by other means.
We therefore recommend the following changes:
• EBITDA Test. We urge you to ensure that both Main Street Loan programs are available to
growing, entrepreneurial companies with negative EBITDA by focusing instead on maximum
loan amounts (i) as a percentage of enterprise valuation or (ii) determined by commonly
accepted debt/equity metrics on a per industry basis.
Mr. Chairman, we appreciate the opportunity to provide feedback on the Main Street Lending programs
and are thankful for the Federal Reserve's efforts to support firms such as ours during this economic
crisis.
Sincerely,
VP Public Affairs
Sonder
+1 (617) 300 0956 sender.com
10115th Street, San Francisco, CA 94103 Taking Stay Further
ti
ePA.H 1$H nnoADCASTING I S'VStlU
Richard D. Lara
Executive Vice President & General Counsel
Phone:305-644-4824
rlara@sbscorporate.com
Apnl 30, 2020
The Honorable Jerome H. Powell, Chairman VIA FEDERAL EXPRESS
Board of Governors of the Federal Reserve System
20 th Street & Constitution Ave., NW
Washington, DC 20551
The Honorable Steven T. Mnuchin, Secretary
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220 ·
Re: AN URGENT REQUEST FOR FINANCIAL ASSISTANCE ON BEHALF OF
MINORITY-OWNED AND WOMEN-OWNED BROADCASTING COMPANIES
Dear Chairman Powell and Secretary Mnuchin,
The undersigned write to you as representatives of the leading __minority and women-owned
broadcasting companies, as well as the sector's trade and nonprofit associations, who collectively employ
hundreds of people and play an important role as FCC licensees in providing news and information to
those millions of listeners and viewers most devastated by the COVJD-19 pandemic. It should also be
noted that the workforce we speak to plays an important role in providing basic health care and supply
chain services to the general population, oftentimes at the expense of their own well-being. The
undersigned have all been severely impacted by the COVID-19 pandemic and are in need of immediate
governmental financial assistance to continue in our mission as FCC-licensed stewards of news and
information for our disadvantaged and underserved citizens throughout the country.
We have reviewed the requirements published by the Treasury Department for both the Main Street
New Loan Facility ("MSNLF") and the Main Street Expanded Loan Facility ("MSELF") and while we
applaud the government's efforts to extend relief to businesses - like ours - which are experiencing
substantial liquidity issues solely as a result of the COVID-19 crisis, we believe that, as drafted, there are
significant issues with certain details of the announced programs that will limit the ability to provide the
benefits intended Indeed, the application of certain of.the programs' current requirements to the broadcast
industry could imperil jobs - not just at our companies but also at thousands of other radio and TV
stations - businesses deemed "essential service providers'' under the 2018 amendments to the Stafford
Disaster Relief and Emergency Assistance Act (See §5189e, definition of "Essential Service Providers"
which includes radio and television broadcasting, cable service, and direct broadcast satellite service).
Moreover, as currently drafted, the programs could further imperil access for millions of listeners who
depend on their local media for news and information-especially disenfranchised and underrepresented
minority audiences. By way of example:
• Both programs have a leverage limit. For new loans under the MSNLF, a borrower would be
limited to no more than four times leverage, including the amount of the new loan. According to Capital
IQ, more than 800 companies already have leverage in excess of four times and would therefore be unable
Spanish Broadcasting System, Inc .
PABLO RAUL ALARCON MEDIA CENTER 7007 NW 77TH AVENUE, MIAMI, FL 33166
to access funds under this program While the MSELF program allows a borrower to upsize an existing
loan up to six times leverage, that still excludes almost 400 companies, according to Capital IQ, based on
that leverage test. In other words, the companies that are in the most danger are precisely the ones unable
to procure the necessary funding. Many of us may be precluded from accessing the needed .capital under
either program due to our existing loans. We respectfully suggest that these leverage ratios should be
raised significantly.
• The· leverage calculations under the stimulus programs should be based on net leverage,
allowing borrowers to reduce debt by deducting their cash on hand.
• The amortization of loans under MSNLF should improve upon the amortization terms of any
pre-existing debt.
• Given that many of us have collateral agreements in place, it would be complicated, if not
impossible, to grant collateral. for these new stimulus loans. We recommend that these loans should be
provided on an unsecured basis.
We propose allowing that proceeds from these loans be used to repay/refinance existing debt so
as to make the program more inclusive, given the severity of the circumstances and the indications that
credit conditions are beginning to tighten and will worsen ifwe enter into a prolonged recession.
• We are also concerned with the proposed limitations on compensation. Overly burdensome
c9mpensation limitations ·will create barriers that will inhibit the ability to retain popular on-air hosts,
sales employees and skilled managers in a highly competitive marketplace. We propose limiting the
timeframe to two years with express carve-outs for ta1ent, managers, and sales employees.
Gentlemen, we are all truly appreciative of the response from the Federal Reserve and the Treasury
Department in supporting businesses in their time of need. We remain optimistic that, with the minor
revisions suggested herein, minority and women broadcasters will be able to access the capital we need
and coqtinue to serve the public interest by assisting and infonning our communities·across the country
during this unforeseen and unprecedented time ofupheaval and isolation.
We thank you for your attention and efforts at addressing these pressing concerns, in the name of
millions ofcitizens whose voices are rarely, if ever, heard.
Respectfully,
Richard D. Lara Raul Alarcon, Chainnan and CEO
EVP and General Counsel Spanish Broadcasting System, Inc.
Spanish Broadcasting System, Inc.
·,
S_panish Broadcasting System, Inc.
PABLO RAUL ALARC6N MEDIA CENTER 7007 NW 77TII AVENUE, MIAMI, FL 33166
BROADCASTING COMPANIES and SUPPORTERS
(In alphabetical order)
Michael Chandler, CEO
Rejoice Mu~ical Soul Food Radio Network
Art Gilliam, Chainnan and CJ:;O
Gilliam Communications
Steve Hegwood, CEO
Core Broadcasting Group
David Honig, President Emeritus and Senior Advisor
Multicultural Media, Telecom & Internet Council (MMTC)
Sherman K. Kizart, Managing Director
Kizart Media Partners
Alfred Liggins, President and CEO
Urban One '
Chesley Maddox-Dorsey, President and CEO
American Urban Radio Networks and Superadio Networks
Ms. Aama Nahuja, Legal Counsel
A Wonderful Media Company
Russell Perry, Chairman and CEO
Perry Broadcasting and Publishing
Steven C. Roberts, CEO and President
Roberts Broadcasting Company
Howard Robertson, CEO
Spotset Networks
Dr. Nimisha Shukla, Fellow of the American Academy of Pediatrics &
Owner and Managing Partner ofNJ Broadcasting LLC/South Asian Broadcasting
Frank Washington, Chairman and CEO
Crossings Television Network
Robert Wingo, Chairman and CEO
Sanders Wingo Advertising
James Winston, President
National Association ofBlack Owned Broadcasters
Spanish Broadca s ting System, Inc.
PABLO RAUL ALARCON MEDIA CENTER 7007 NW 77m A VENUE, MIAMI, FL 33166
TECH
GC
April 15, 2020
The Honorable Jerome H. Powell, Chairman
Board of Governors of the Federal Reserve System
20th Street and constitution Avenue NW
Washington, DC 20551
RE: Main Street Lending Facility - EBITOA Should Not Be the Sole Criteria of Loan Eligibility/ Size
Dear Chairman Powell :
We appreciate the opportunity to comment on the Federal Reserve's Main Street (new and expanded)
Loan Programs.
As a community of growth-stage technology startups, we are concerned that t he utilization of EBITDA as
the sole metric to determine loan eligibility and size will inadvertently and inappropriately exclude many
companies who were intended to be eligible for this program.
Growth-stage technology startups generally reinvest all of their potential profits into hiring new
employees (and not dividends or stock buybacks) and thus often will have no EBITDA. These are t he
American businesses t hat often generate exponential job growth and have the most potential to
positively and disproportionately contribute to the economy in the future.
Many of these companies have also been excluded from the Paycheck Protection Program (PPP) due to
the affiliate rules and so they have not been addressed by any existing economic relief program.
Therefore, we do not believe Congress intended that growth-stage technology startups with no EBITDA
be excluded from the Main Street Lending program.
In light of this, we request that you consider adding other metrics (in addition to EBITDA) as alternatives
for banks to use in determining loan eligibility and size under the Main Street Lending Facilities. Some of
examples of additional alternative metrics might include:
• Percentage of Enterprise Value (e.g., a market capitalization or a recent arms-length or
independent valuation)
• A metric based on a combination of revenue, gross margin, and commonly accepted debt/equity
met rics on a per industry basis
• As determined by the lending bank (who retains 5% risk) in applying reasonable underwriting
criteria relevant to growth-stage companies, such as cash on hand, existing debt, operating
costs, gross margins, etc.
Mr. Chairman, we appreciate the opportunity to provide feedback on the Main Street Lending program
and are thankful for the Federal Reserve's efforts to protect growth-stage technology startups during
this economic crisis, so they can bolster our global competitive advantage in a time when it is needed
more than ever.
Sincerely,
Kiran Lingam
Co-Founder and President
TechGC
April 16, 2020
The Honorable Jerome H. Powell, Chaim1an
Board ofGovernors of the Federal Reserve System
20th StJ'eet and Constitution Avenue NW
Washington, DC 20551
Dear Chairman Powell:
We appreciate the Federal Reserve's announcement of the Main Street Loan Programs. We are submitting this letter
in response to your call for comments on the programs. Ow· goal is to ensw-e companies that need it can access these
programs while also ensw-ing that there are safeguards in place with regards to taxpayer funds.
ThJ'edUp Inc. operates a leading technology-enabled e-commerce apparel resale marketplace. Based in Oakland,
California, we employee approximately 1,500 people across our offices and distribution centers which are located in
California, Pennsylvania, Arizona, Georgia and Illinois. With aspirations of becoming a publicly traded company,
we have been growing rapidly and, prior to the COVID-19 pandemic, had been anticipating significant additional
growth in the months and years to come.
In response to the COVID- 19 pandemic and the stay-at-home orders that have brought om economy to a near
standstill, we have taken drastic measmes to protect om business. We implemented corporate furloughs and hiring
freezes and have also reduced om discretionary spending in virtually every category in order to make sme om
company is able to smvive this pandemic. However, in the cmTent environment, the path to recove1y appears
uncertain.
As it cw-rently stands, ThredUp Inc. is not e ligible to apply for either of the Main Street Loan programs because the
programs require bonowers to have positive EBITDA. It is possible that this requirement aims to address the
solvency requirements under Section 13(3) ofthe Federal Reserve Act. Unfo1tunately, most startups and growth
stage companies cannot meet this test, but they regularly verify solvency with lenders, investors and business
counte1parties by other means.
We therefore recommend the following changes to the EBITDA Test.
We mge you to ensw-e that both Main Street Loan programs are available to growing, entTeprenew-ial
companies with negative EBITDA by focusing instead on maximum loan amounts (i) as a percentage of
enterprise valuation, (ii) determined by commonly accepted debt/equity metrics on a per indust1y basis
and/or (iii) as determined by the lending bank (who retains 5% risk) in applying reasonable underw1iting
criteria relevant to growth-stage companies, such as cash on hand, existing debt, operating costs, gross
margins, etc.
Mr. Chairman, we appreciate the oppo1tunity to provide feedback on the Main Street Lending programs and are
thankful for the Federal Reserve's efforts to support foms such as ours during this economic crisis.
Sincerely,
Alon Rotem
General Counsel
ThredUp Inc.
cc: Members of Congress
April 16, 2020
The Honorable Jerome H. Powell, Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue N.W.
Washington, DC 20551
Dear Chairman Powell:
I write on behalf of TripActions, Inc. We appreciate the actions the Federal Reserve has taken to
support the US economy through the coronavirus pandemic, including the proposed Main Street
Lending Program. We submit this comment letter to explain how the Program's proposed use of
EBITDA to determine maximum loan size excludes midsize growth-stage companies from
participation. We offer suggested alternatives to EBITDA to support effective and efficient
lending while safeguarding taxpayer funds.
TripActions is a US-based corporate travel management technology company. Customers trust
our travel and payments platform to manage their business travel programs. Our innovative
platform helps companies create tailored policies, seamlessly reconcile expenses, ensure
traveler safety, and manage the financial impact of travel disruptions. In response to the current
pandemic, we have released new platform tools to help companies stay informed about
changes in global travel conditions and react quickly to protect the health and safety of their
employees.
The coronavirus pandemic is having a particularly devastating effect on the business travel
sector in the United States. TripActions offers a usage-based pricing model, which means that
as corporate travel stopped, so did our revenues. We currently employ over 700 people in the
US, and our platform supports over 4,000 corporate customers and their travelers. Fast, efficient
and effective government support is critical to help companies like TripActions weather the
impact of the coronavirus pandemic until US businesses start running (and traveling) again.
The Main Street Lending Program currently proposes the use of 2019 EBITDA to calculate the
maximum size of an Eligible Loan. Effectively, the Program requires the borrower to have
positive EBITDA for its loan to be eligible. Unfortunately, this has the consequence of excluding
growth-stage companies -- many of whom, like TripActions, are innovators in otherwise mature
industries -- from eligibility in the Program.
As a growth-stage company, TripActions has invested heavily in product development, sales
and marketing, and other growth functions ahead of revenue. These crucial investments have
allowed us to rapidly release new product features and tools that help our customers manage
the disruptions to global travel -- but these same investments resulted in negative EBITDA in
TripActions I 1501 Page Mill Road, Building 1 I Palo Alto, CA 94304
2019. Under the proposed terms of the Main Street Lending Program, TripActions and similar
growth-stage companies, who are too large to qualify for Small Business Administration relief,
are left out of the Program as well.
There are other means of calculating appropriate loan sizes for the Main Street Lending
Program while also assessing whether potential borrowers have the financial standing to ensure
that taxpayer funds are protected. We urge you to consider the following changes to the
Main Street Lending Program eligibility requirements:
• For companies with negative EBITDA, lending banks should apply industry-specific
criteria such as debUequity ratio, cash on hand, free cash flows over the loan term,
and/or an assessment of operating costs and gross margins to evaluate borrower
solvency and ability to service the loan.
• Similar to the Paycheck Protection Program administered by the SBA, maxim um loan
amounts should be calculated based on payroll and other operating costs.
When the Federal Reserve announced the Main Street Lending Program, you articulated the
overarching goal to "support lending to small and medium-sized businesses that were in good
financial standing before the onset of the COVID-19 pandemic." TripActions is a perfect
example of the type of company this Program should be helping: a company whose revenue
dropped precipitously as the coronavirus pandemic spread around the world, but with the
infrastructure to quickly pick back up as the economy begins to reopen. Please consider our
proposed changes to the Program's eligibility requirements to avoid disqualifying innovative
growth-stage companies who have invested in products and services that bring real value to the
US economy.
We appreciate the opportunity to provide feedback on the Main Street Lending Program and
how it might unintentionally exclude growth-stage companies from Program financing. We thank
you for your consideration, and for your continued support of US firms du ring the coronavirus
pandemic.
Sincerely,
~
Sai Jahann
General Counsel
TripActions, Inc.
TripActions Letter to Federal Reserve 2
UNITED
NEIGHBORHOOD
HOUSES
45 Broadway, 22nd Floor, New York, NY 10006
Tel: 212-967-0322 I www.unhnv.org
April 16, 2020
The Honorable Jerome H. Powell, Chair, Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue N.W., Washington, DC 20551
Re: Main Street New Loan Facil ity
Dear Chairman Powell:
On behalf of United Neighborhood Houses of New York, I write to offer comments in opposition
to the proposed rule regarding nonprofit inel igibility for the Main Street Lending Program, which is
supposed to provide crucial economic relief to organizations with over 500 employees that
continue to operate in the wake of COVID-19. United Neighborhood Houses (UNH) is the
association of 40 nonprofit settlement houses and neighborhood centers in New York City and
three in upstate New York, reaching over 765,000 New Yorkers every year. We strongly urge the
Federa l Administration to ensure that emergency relief funds reach the nonprofit sector, such as
in the form of emergency relief, to keep a low-paid workforce economically stable and available
to deliver services to those in need.
The Federal Administration's decision to cut out nonprofits from the Main Street Lending
Program would be a devastating blow to human services providers that are also ineligible for the
Paycheck Protection Program. Nonprofit human services providers with over 500 employees are
critical partners to federal, state, and local governments in maintaining the social safety net.
Excluding large nonprofits from this initiative would have a devastating impact not only on
struggling New Yorkers, but would wreak havoc on our state budget as well. Failure to save large
nonprofits would shift billions in costs to our state, leaving us with the choice of throwing people
off of assistance or raising revenues at the local level to make up the shortfall.
Nonprofit human services providers in New York City with over 500 employees represent $2.8
billion (about 50%) of the City's $5.8 billion in annual social service spending with nonprofit
partners.1 Yet, larger nonprofits have been excluded from the Paycheck Protection Program
because of their size. Their operating margins are thin (an average of 1%), even before the
reduction of revenue and increase in expenses associated with COVID-19. Without immediate
assistance, some large nonprofits may not make it through May; few, if any, will be in a position
to continue services that will be needed more than ever during the COVID-19 crisis and its
aftermath.
1
"Too Big to Fail." SeaChange, 2020.
UNITED
NEIGHBORHOOD
HOUSES
45 Broadway, 22nd Floor, New York, NY 10006
Tel: 212-967-0322 I www.unhnv.org
Economic recovery from the COVID-19 crisis will only be possible if nonprofit organizations
receive funding to continue serving low-income individuals and families in need of housing
assistance, healthcare, workforce development. childcare, food security, education, and case
management. UNH urges the Federal Administration and Congress to make nonprofits with over
500 employees eligible for the Main Street Lending Program so t hat the human services sector
can remain financially stable throughout the rema inder of the COVID-19 crisis and beyond .
Sincerely,
Susan Stamler
Executive Director
United Neighborhood Houses of New York
United Neighborhood Houses (UNH) is a policy and social change organization representing 42
neighborhood settlement houses that reach 765,000 New Yorkers from all walks of life. A
progressive leader for more than 100 years, UNH is stewarding a new era for New York's
settlement house movement. We mobilize our members and their communities to advocate for
good public policies and promote strong organizations and practices that keep neighborhoods
resilient and thriving for all New Yorkers. UNH leads advocacy and partners with our members on
a broad range of issues including civic and community engagement, neighborhood affordability,
healthy aging, early childhood education, adult literacy, and youth development. We also provide
customized professional development and peer /earning to build the skills and leadership
capabilities of settlement house staff at all levels. For more information, visit
http://www. unhnv.org.
UNITE HERE! UNITE HERE!
Local 737 Local 362
1255 La Quinta Dr., Suite 214 Orlando, FL 32809
Orlando, FL 32809 (407) 851-0626
(407) 857-0737
UNITE HERE!
April 27, 2020
The Honorable Steven Mnuchin Jerome H. Powell
Secretary of the Treasury Chair of the Board of Governors
Department of the Treasury Federal Reserve System
1500 Pennsylvania Avenue, NW 20th Street and Constitution Avenue N.W.
Washington, DC 20220 Washington, DC 20551
Re: Opposition to SeaWorld Enterprises Receiving Federally-backed Emergency Loan from Main
Street Lending Program Unless Company Rehires Its Workforce and Restores Employee Health
Benefits
Dear Secretary Mnuchin and Chairman Powell,
We are writing to you as leaders of the hospitality union UNITE HERE in Florida to express our concern about
how certain companies may intend to use emergency funding provided by the Main Street Lending Program,
and how that could affect thousands of hospitality workers in Florida.
Specifically, we are concerned that SeaWorld Enterprises, which has distinguished itself as a particularly
irresponsible employer by laying off 95% of its employees and canceling their health insurance in the midst of
a pandemic, has told investors the company has been “actively engaged” in pursuing a loan through the
Program.
In late March, SeaWorld began furloughing 95% of its 15,000 full and part-time employees nationwide and
discontinued their health insurance. Less than two weeks later, the company granted restricted stock awards
worth $6.8 million to its top six executives.
The Main Street Lending Program as you know was established by Congress primarily to help mid-size
businesses severely affected by the Coronavirus crisis keep workers on their payrolls. Under the program,
businesses with fewer than 10,000 employees or less than $2.5 billion in 2019 revenue, can receive low-cost
loans of up to $25 million, or they can refinance and “upsize” existing loans of up to $150 million. Principle
and interest payments are deferred for one year.
We understand Treasury and the Federal Reserve has not yet issued final Program guidelines, and participating
banks have not yet begun accepting applications. Nevertheless, SeaWorld’s professed active engagement with
this program concerns us.
In our view, SeaWorld Enterprises or its affiliates, should not receive any taxpayer-supported benefits or loans
until the company puts workers back on payroll and restores their healthcare.
Disney, SeaWorld’s larger competitor, provides an interesting contrast to SeaWorld’s irresponsible behavior.
Disney provided its idled workforce five weeks of full pay and pledged to continue employee health insurance
for the duration of the shutdown. Disney also worked cooperatively with its unions to ensure that when
workers were recently furloughed, they were automatically enrolled for Florida state unemployment insurance.
Although the loan guidelines for the MSLP are not yet published, the provision of the CARES Act that created
the program provides that a “borrower must make a good-faith certification that the funds it receives will be
used to retain at least 90 percent of the recipient’s workforce, at full compensation and benefits, until
September 30, 2020,” and intends “to restore all compensation and benefits to the workers of the recipient no
later than 4 months after the termination date of the public health emergency declared by the Secretary of
Health and Human Services.”
Given SeaWorld’s behavior, we respectfully suggest that if the company applies for a loan, and if an
underwriting bank determines that the company is otherwise eligible for such a loan, that no funds be
disbursed until the company has produced documentation to the bank demonstrating that it has rehired all of its
workers at their full pre-crisis pay, and that all benefits to which those workers were entitled have been
restored. Additionally, the company should establish a hardship fund for those employees who accrued
medical costs during the time they were without benefits, and for workers who cannot afford or are not eligible
for the company-sponsored healthcare plan.
As of December 31, 2019, SeaWorld employed approximately 4,300 full-time employees and 11,000 part-time
employees, 44% of whom were minorities.
Florida state unemployment pays out a maximum total of $275 a week, among the lowest in the nation. Under
the CARES Act, full-time employees also qualify for a $600-a-week federal bonus through July 31, for those
who successfully register. But as of April 23, only 17% of the pending applications in Florida had been
processed – which means that many SeaWorld employees are undoubtedly among the hundreds of thousands
of Floridians who have yet to receive any unemployment benefits since the shutdown.
We oppose any federal aid or loan to SeaWorld until the company can prove it has rehired its workers and
restored their benefits. And we urge you to provide guidance to participating Program lenders that upholds the
intent of the CARES Act to encourage all Program loan recipients to keep people on payroll with full pay and
benefits.
Sincerely,
Wendi Walsh Eric Clinton Jeremy Haicken
President Local 355 President Local 362 President Local 737
Miami Orlando Orlando
cc: The Honorable Donna Shalala
Mr. Bharat Ramamurti
COUNTY COMMISSIONERS CHIEF OF STAFF
DIANA IREY VAUGHAN JOHN W . HAYNES
CHAIR 724-22 8 -6725
LARRY MAGGI
CHIEF CLERK
VICE CHAIR
CYNTHIA B. GRIFFIN
NICK SHERMAN
724-228·6724 <llnuufu uf ~as4ingfnu 724·228-6723
FAX: 724-228·6965
GOMMONWEALTH OF PENNSYLVANIA
I 00 WEST BEAU STREET, Sl:JITE 702
WASHINGTON. PA 1530 I
April 13, 2020
The Honorable Jerome Powell, Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW
Washington, DC 20551
Dear Chairman Powell:
.
Thank you for your work in passing the Corona virus Aid, Relief, and Economic Security (CARES) Act, so we can begin
to resolve the human and economic consequences created by this global pandemic.
As you are aware, Section 4003 (b) (4) ofthe CARES Act makes $454 billion available in loans, loan guarantees, and
other investments to programs or facilities established by the Board of Governors of the Federal Reserve System. It is
critically important for the oil and natural gas producers that have made our country energy secure and continue to
be an engine for economic growth to be considered.
America's energy sector is facing.challenging markets asso~iated with COVID-19 sappitig de~and. In Washington
County, Pennsylvan_ia, shale development - and the tens-of-thousands of jobs it supports for hard~working
Pennsylvanians - plays a key·role in Western Pennsylvania's economic success. As the county commissioners for
Pennsylvania's second-largest natural gas producing county, shale development has been an absolute blessing and
continues to deliver positive benefits for our communities.
Washington County is home to the first Marcellus Shale well drilled by Range Resources in 2004. Sixteen years later,
we are the second largest producing county in Pennsylvania and have inves~ed more than a halfbillion dollars in
infrastructure and economic development.
Thanks to shale development, we've seen incre.a sed tax revenues without raising taxes and employment levels have
surged, aH while residents enjoy significant home energy savings. Over the ye_a rs, we have worked t_o do all we can at
the county level to attract investment, grow our economy and ensure the energy produced in Washington County is
done safely and responsibly.
We now ask that you do the same at the federal level.
Range Resources has helped Washington County grow into what it is today. which is why we encourage you to make
the tax and loan reliefprovisions included in the CARES Act available to Range and other companies that are critical
to Western Pennsylvania's economy. Support for these companies means thousands ofhardworking men and-women
in Southwestern Pennsylvania are.getting much needed assistance.
We appreciate your leadership during this national emergency and thank you for your consideration.
Sincerely,
WASHINGTON C O ~ QFCOMMleEliS f'ri, ..
Oh/_f/
n _La~ggi ~ NickSh e ~
Vice Chair Commissioner
/jht
STATE OF WASHINGTON
WASHINGTON STATE ARTS COMMISSION
711 Capitol Way S, Suite 600, PO Box 42675 Olympia, WA98504-2675
(360) 753-3860 • FAX (360) 586-5351
April 17, 2020
The Honorable Jerome Powell The Honorable Steven Mnuchin
Chairman, Board of Governors Secretary
Federal Reserve System U.S. D epartment of the Treasury
20th Street & Constitution Ave., NW 1500 Pennsylvania Avenue NW
Washington, D C 20551 Washington, DC 20220
D ear Chairman Powell and Secretary Mnuchin:
On behalf of Washington State's nonprofit Arts, Cultural and Creative sectors, I thank you for the
opportunity to provide input into potential eligibility changes to the "Main Street" business
lending facilities. The CARES Act clearly reflected Congress's intent that nonprofits of qualifying
size be eligible for this funding "to the extent practicable". The proposal to leave nonprofits out
entirely is clearly incompatible with the spirit of the legislation.
We respectfully and urgently request tl1at nonprofits of all kinds be included in the language
of tliis new and very important initiative.
Specifically, we request that you:
• Provide forgivable emergency assistance loans to nonprofit organizations of all sizes.
• Provide forgivable loan assistance to self-employed workers, sole proprietors, small LLC's
and small 501 (c)(3) organizations to offset fi"{ed overhead costs such as rent, utilities,
insurance and debt service without per employee limits.
As tl1e Washington State A1ts Commission (ArtsWA), we know that the Arts and Creative Sectors
are enormously important to our state's economy, quality and vibrance of life, and community
identity. Statewide, the sector comprises nearly 18,000 businesses, with 70,000 employees, and
countless creatives and contractors. T he sector drives significant economic activity and spurs
tremendous social impact. It has a significant economic multiplier effect on otl1er business activity
such as restaurants and lodging. It supports not only nonprofit arts jobs, but jobs at surrounding
businesses. As an economic sector, arts and culture workers add remarkable and recognizable value
to Waslllllgton's high quality of life.
Washington's Arts and Culture sector is valued at more than $44 billion dollars (201 7 data) .
Compared to other sectors of Washington State's economy, Arts and Culture ranks number one at
$44 billion dollars. Retail ranks second at just over $43 billion dollars, followed by constrnction at
$22 billion dollars. Washington State's Arts and Culture sector increased in value by 11.48% between
STATE OF WASHINGTON
WASHINGTON STATE ARTS COMMISSION
711 Capitol Way S, Suite 600, PO Box 42675 Olympia, WA98504-2675
(360) 753-3860 • FAX (360) 586-5351
2016 and 201 7. (Source: Arts and Cultural Production Satellite Account (ACPSA), apartnership betJveen the
NationalE nd01vmentfar the Arts (NE.A), Office ofResean:h & Ana!Jsis, and the U.S. Bureau ofE conomic
Ana!Jsis)
Clearly, the nonprofit a1ts sector is critical to the state. But it is being devastated economically by
COVID-1 9 and needs federal assistance in the same way as its for-profit counterparts. Since the first
U.S. COVID-1 9 case was repo1ted on J anua1y 20, almost all a1ts and cultural events have been
cancelled statewide. Closures of facilities and buildings have been reported in thousands of
communities. Current indications from the Administration and the CDC suggest that some kind of
social distancing and other measures could extend through the summer. T his will mean billions in
additional revenue losses for the nonprofit arts and culture field.
One remedy immediately available is to include the nonprofit arts, cultural, creative sectors, local
chambers, civic organizations, and nonprofits of all kinds in the "Main Street" business lending
facilities. T he non-profit arts and cultural sector in \Vashington State is important to the
communities they serve. T hey attract cultural tourists, drive business to restaurants, employ full and
part-time workers, and partner with schools to help educate our children. By receiving support in
the same way as the for- profit sector, nonprofit businesses will be given a fair and fighting chance
to survive the COVID-1 9 crisis.
Thank you in advance for your positive response and for the inclusion of nonprofits of all kinds in
the "Main Street" business lending facilities.
Sincerely,
Karen Hanan, E xecutive D irector
Washington State Arts Commission
karen.hanan@arts.wa.gov / 360-586-2423
Cc: Members of the Washington State Congressional D elegation
Cc: Casey Katims, D irector, Governor Jay Inslee's \Vashington, D.C. Office
FOR YOUTH DEVELOPMENT"
FOR HEALTHY LIVING
FOR SOCIAL RESPONSIBILITY
April 16, 2020
To: Board of Governors of the Federal Reserve System
Via Email
On behalf of YMCA of the USA, the resource office for the nation's 2,600 YMCAs, I urge you to
include nonprofits in the Main Street lending progra m. YMCAs across the country are on the
frontlines of the response to the COVID-19 crisis, providing care to children of health care
workers and first responders, food to the hungry and support to the isolated, homeless and
most vulnerable. In communities large and small, YMCAs are pa rticula rly focused on delivering
essential services and resources to those who have been disproportionately affected by th is
pandemic - communities of color and the underserved. The pandemic has simultaneously
increased the demand for the services that the Y offers while having an extreme negative
impact on the finances of both the organization and our employees. It is essential that Ys are
able to participate in government relief programs so we can continue to operate in the future.
While we are saddened by the toll the COVID-19 pandemic has taken, we are also heartened by
the powerful stories of service and sacrifice in our communities. We are inspired by the work
that the YMCA and other community nonprofits are doing, and the hope they are prov iding in
our hometowns.
However, at this crucial moment, when our communities need us more than ever, nonprofits
like the Y are struggling, and we need help on a scale that only t he federal government can
provide. The CARES Act represented progress, but we need more help. If we don't get it, many
communities will lose their essential nonprofit organizations, including YMCAs.
As the Treasury Department works to create the program directed under the CARES Act to
provide loans to nonprofits and other mid-size business of up to 10,000 employees, we request
that the prog ram:
• Model the SBA PPP program approach by forgiving loan amounts that meet certa in
criteria around employment.
• Include a 0.50% interest rate (50 basis points) for 501(c)(3) charitable nonprofits at a
5-year amortization
• Give priority to 501(c)(3) charitable nonprofits responding to the COVID-19 crisis.
• Provide that payments shall not be due until two years after a direct loan is made
• Stipulate that employee retention provisions begin on the date that loan funding is
received by the borrower
• Define "workforce" as full-time employees or full-time equivalents for the purposes of
implementing any workforce restoration and retention provisions
YMCA OF THE USA
101 N Wacker Drive, Chicago IL 60606
P 800 872 9622 F 312 977 9063 ymca.net
Many YMCAs, especially those in larger metropolitan areas, employ more than 500 staff in
aggregate across multiple locations and are not eligible for the Paycheck Protection Program.
Their size is consistent with the communities they serve and provides them scale to deliver
services. However, much like a small business, their cashflows are severely stressed due to the
pandemic, with no ability to recoup lost inflows, and their primary lever to manage all this is
furloughing or laying off employees. Including these larger nonprofit organizations in the Main
Street lending program would afford the same relief for their employees that is available to
smaller organizations and ensure that these important community anchors can continue to
provide urgently needed services for their neighbors.
It's important that you include loan forg iveness for nonprofits, similar to the Paycheck
Protection Program, to eliminate the burden of repayment in these uncertain times. While Ys
are closed to members and programming is paused, membership and program fees are
permanently lost. Loan forgiveness will help stabilize these organizations so they can reopen.
Nationwide, 2,640 YMCAs across the country serve 10,000 communities. In 2019, the Y served
over 22 million meals to over 611,000 youth in families facing food insecurity. The Y is the
nation's largest nonprofit provider of child care and out-of-school time programs, with 1,400
early learning sites, 7,360 afterschool program sites, 1,870 summer day camp programs and
266 resident camps. These programs not only give parents and caregivers the peace of mind
that comes with knowing their children are in a safe place when they go to work, but also
provide children with an enriching environment where they can achieve their fullest potential.
Ys also help millions of individuals prevent and control chronic disease through evidence-based
health i nterventions. Those living with hypertension, arthritis and cancer manage their
condition and restore their health through these interventions. And individuals with pre
diabetes are able to avoid developing diabetes, one of the leadi ng drivers of health costs in our
country. These community-based interventions are an important component to supporting the
health system and controlling escalating health care costs.
But today, things look very different. With membership facilities closed and most of our
preschool and school age child care not operating, overall the Y expects in excess of $400
million of lost operating revenue in April alone. Additionally, nonprofits already were seeing
declines in donations due to the new tax law, and those declines have accelerated due to
coronavirus. If faci lity closings continue throughout the summer, YMCAs collectively could see
lost revenue as high as $2.5 billion.
Prior to the pandemic, the Y network employed more than 500,000 staff members. YMCAs
already have laid off hundreds of thousands of employees in communities large and small. In
fact, we know that many Ys have laid off and furloughed most of their staff, up to 95% in
some cases.
But Ys are always here for our communities. Despite facilities being closed, Ys are continuing to
find ways to help those in need by providing emergency child care for health care workers and
first responders, food programs to children without access to school meals, housing for at-risk
populations, socialization services for seniors facing isolation, virtual fitness and youth
programs, blood drives for community partners and holist ic health and wellness support for all
ages.
Nonprofits are part of the essential fabric that holds communities together. Without them, our
communities will struggle to recover and may never be the same. Please take steps to ensure
that all nonprofits, large and small, have access to the support they need to survive this crisis
and help their communities recover and thrive again.
Sincerely,
Kevin Washington
President and Chief Execut ive Officer
YMCA of the USA
CENTER FOR CAPITAL MARKETS
COMPETITIVENESS
TOM QUAADMAN 1615 H STREET, NW
WASHINGTON, DC 20062-2000
EXECUTIVE VICE PRESIOBNT
(202) 463- 5540
tquaadman@uschamber.com
April 16, 2020
The Honorable Jerome Powell The Honorable Steven T. Mnuchin
Chairman Secretary
Board of Governors of the Federal United States D epartment of the T reasury
Reserve System 1500 Pennsylvania Avenue, NW
20th Street and Constitution Avenue, NW Washington, DC 20220
Washington, DC 20551
Dear Chairman Powell and Secretary Mnuchin:
The U.S. Chamber of Commerce's ("the Chamber") Center for Capital Markets
Competitiveness ("CCMC") appreciates the opportunity to comment on programs
announced by the Federal Reserve Board ("Federal Reserve"), with the support of the
T reasury Department ("Treasury"), to promote liquidity to different corners of the
economy. These programs are extremely important to support businesses struggling with
the cashflow challenges caused by the coronavirus pandemic. The guiding principle of the
U.S. Chamber of Commerce ("the Chamber'') during this crisis is that no family and no
business should go bankrupt because of the financial hardships caused by the coronavirus
pandemic.
The uncertainty that has been thrust upon the business community by the pandemic
has required the private sector to turn to the federal government to provide resources and
reassurances in the short-term so our financial markets can function efficiently. Liquidity in
many corners of our financial markets have dried up in recent weeks as issuers and
investors grapple with understanding their individual circumstances and the direction
overall economy. The Federal Reserve will, and already is, playing a key role for restoring
confidence to the business community and financial markets.
The comments in this letter reflect the Chamber's view on the Paycheck Pro tection
Program Lending Facility (PPPLF), the T erm Asset-Backed Securities Loan Facility
(fALF), the Primary Market Corporate Credit Facility (PMCCF), the Secondary Market
Chairman Powell and Secretary 1v1nuchin
April 16, 2020
Page 2
Corporate Credit Facility (SMCCF), the Municipal Liquidity Facility (MLF), the
Commercial Paper Funding Facility (CPFF), and liquidity challenges for mortgage servicers.
The Chamber is providing feedback on the Main Street Lending Program under separate
cover.
Paycheck Protection Program Lending Facility
We commend the Federal Reserve and Treasury for authorizing the Paycheck
Protection Program Lending Facility (PPPLF). The effectiveness of the Small. Business
Administration's Paycheck Protection Program (PPP) is a top priority of the Chamber. The
PPP is a lifeline for countless small businesses, and it is therefore appropriate the Federal
Reserve would offer liquidity to financial institutions issuing these loans. The below
recommendations are intended to enhance the impact of the PPPLF.
The Federal Reserve should clarify "eligible borrowers" for the purposes of the
PPPLF. The term sheet notes that all depository institutions that originate PPP loans are
eligible and that the Board is "working to expand eligibility'' to other lenders that originate
PPP loans. Non-depository lenders approved by the Small Business Administration (SBA)
to issue PPP loans should automatically gain access to the PPPLF.
The Federal Reserve should facilitate the secondary market by addressing eligibility
for depository institutions that are not PPP approved lenders. The PPPLF term sheet
appears to only contemplate the pledging of PPP loans by the lenders that originate them,
excluding the ability of non-originating depository institutions from holding loans, loan
participatio ns, or other securitization interests to access the PPPLF by pledging those
instruments. Such a narrow approach would inhibit the robust development of a secondary
market in PPP loans, which is necessary in order to fully allow all PPP lenders (particularly
non-bank lenders who are currently unable to directly access the PPPLF) to maximize their
balance sheet and maximize PPP lending to small businesses in need of funds on an urgent
basis.
The PPPLF should contemplate additional guidance on SBA affiliation rules under
the PPP. The Chamber has advocated for clarification of these rules, including for
borrowers backed by angel investors, venture capital and private equity, so more businesses
can access the loans available under the PPP. 1
1
U.S. Chamber of Commerce, other trade associations, Small Business Administration Affiliation Rules
Applicability to Paycheck Protection Program [Letter written April 10, 2020 to the Small Business
Administration and Treasury Department] available at http://www.centerforcapitalmarkets.com/wp
content/uploads/2020/04/200410 Coalition PPPAffiliationRules Fed Treasury SBA.pd£?#
Chairman Powell and Secretary 1v1nuchin
April 16, 2020
Page 3
Finally, the Federal Reserve should clarify available relief from applicable leverage
and capital requirements for depository institutions that hold PPP loans on their balance
sheet. The risk weight of PPP loans under the CARES Act is zero. And, on April 9, 2020,
the federal banking regulators issued an interim final rule to allow banking organizations to
neutralize the effect ofPPP loans financed under the PPPLF on leverage capital ratios, but
this would effectively require lenders to pay 35 basis points for regulatory relief. However,
if the lender funds the loan the risk, weighting is zero but there is no relief for leverage. The
Federal Reserve should reconcile this discrepancy for regulatory relief in order to encourage
banks to use the PPPLF.
Term Asset-Backed Securities Loan Facility
The Chamber supports the Federal Reserve establishing a Term Asset-Backed
Securities Loan Facility (TALF). The Federal Reserve announced the establishment of the
TALF on March 23, 2020,2 wherein it noted it would lend up to $100 billion on a non
resource basis - an amount equal to the market value of the asset-backed securities (ABS)
less a haircut - to holders of certain AAA-rated ABS backed by newly and recently
originated consumer and small business loans. This announcement noted that eligible
securities will include those backed by student loans, auto loans, credit card loans, loans
guaranteed by the SBA, and other certain asset classes - all ofwhich support critical aspects
of our economy.
The commercial real-estate industry has faced a number of unexpected yet severe
headwinds in recent weeks as a result of the pandemic. In general, tenants that were
otherwise credjtworthy before the crisis are unable to pay rent due to disruptions in their
business including government orders to limit their operations. The cashflow challenge is
especially acute for nonbank lenders that depend on lines of credit and repurchase
agreements with depository institutions that are oftentimes secured by assets with
valuations tied to commercial real-estate; the liquidity challenges for these lenders appear to
be compounded by the simultaneous demand for liquidity by nearly every sector of the
economy.
The Federal Reserve's April 9, 2020 announcement, which includes changes to the
TALF term sheet, while positive, appears to fall short of ameliorating major liquidity issues.
Importantly, the updated term sheet indicates that TALF-eligible coUateral will now include
2
Board of Governors of the Federal Reserve System, Federal Reserve announces extensive new measures
to support the economy (i\ifarch 23, 2020), available at
https://www.federalreserve.gov/newsevents /pressreleases/monetary20200323b.h tm
Chairman Powell and Secretary 1v1nuchin
April 16, 2020
Page 4
the AAA rated tranches o f both outstanding commercial mortgage-backed securities
(CMBS) and newly issued collateralized loan obligations (CLOs). T here is evidence to
suggest that the announcement to add AAA legacy CMBS to the program has already
improved liquidity in the sector. The Chamber supports this expansion ofTALF, which we
believe would help alleviate the extreme funding pressures in the commercial real-estate
market during this period of uncertainty.
The Chamber recommends further expansion of the eligible collateral that may be
pledged by borrowers under TALF. First, it should be expanded to include new issue
conduit CMBS. Second, it should be expanded to include conduit and single asset single
borrower (SASB) securities. The Federal Reserve should consider the merits o f expanding
TALF to non-investment grade securities that support the commercial real-estate market to
ensure liquidity is available where it is needed the most without exposing itself to credit
losses that would cause a net loss for the program. Fur thermore, to the degree possible,
information made available to the public about participants in the program should
distinguish the credit risk and performance of pledged assets.
The Chamber also broadly supports the Federal Reserve providing liquidity to the
secondary market for consumer debt via T ALF. At least one asset class that merits
clarification is those securities backed by student loans. This market can generally be
classified as 1) Federal Family E ducation Loan Program (FFELP) loans; 2) in-school
private student loans; and 3) refinanced private student loans; all of which have distinct
characteristics and credit risk. For example, FFELP loans include a guarantee from the
federal government, and in-school generally have a higher credit quality than o ther student
loans. Therefore, these securities should be itemized separately and provided the
appropriate collateral treatment in order to maximize liquidity for this market.
Additionally, the Federal Reserve should consider simplified customer agreements
and documentation requirements for participating in TALF. One of the most time
consuming aspects of the TALF program announced in 2008 was the time it took to get
investors onboarded and ready to participate in the program.
Finally, the Federal Reserve should clarify that a U.S. branch or agency of a foreign
bank is eligible to participate in T ALF. Any limitation would undermine the intent of the
CARES Act, which is to quickly provide lending and liquidity to businesses in the U.S.,
many of which choose to bank with a U.S. branch or agency of a foreign bank. The term
sheet released on March 23, 2020, notes "A U.S. company would be defined as a U.S.
business entity organized under the laws of the United States or a political subdivision or
territory thereof (including such an entity that has a non-U.S. parent company), or a U.S.
Chairman Powell and Secretary 1v1nuchin
April 16, 2020
Page 5
branch or agenry efaforeign bank." The revised April 9, 2020 term sheet removes the explicit
reference to a U.S. branch or agency of a foreign bank.
Primary Market Corporate Credit Facility
The Chamber commends the Federal Reserve, with the support of Treasury, for
providing up to $750 billion in combined support to eligible lenders through both the
Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate
Credit Facility (SMCCF). We support the PMCCF as it will provide an important source of
liquidity to companies navigating business challenges as a result of the pandemic. The
PMCCF, by directly purchasing corporate debt of eligible domestic investment grade
issuers, will serve as an important backstop for corporate debt However, the Chamber
encourages the Federal Reserve to bring greater clarity to the terms and conditions
surrounding limits per issuer, the eligibility of issuers, and the documentation, disclosures,
and operational mechanics required to access the PMCCF.
Limits per issuer
According to the PMCCF term sheet, the maximum amount of outstanding bonds
or loans of an eligible issuer that borrows from the facility may not exceed 130% of
the issuer's maximum outstanding bonds or loans on any day between March 22,
2019 and March 22, 2020. Given the importance of the 130% test to issuers as they
consider their funding plans, we believe greater clarity is required to address the
following questions.
• Is the 130% test applicable only while the issuer has bonds/ loans held by the
facility?
• Is this percentage a maintenance or incurrence test?
• \Xlhat are the repercussions o f breaching the 130% limit?
• Is the 130% test based on notional value, balance sheet value or another
methodology?
Eligibility considerations
The PMCCF is an important component of the Federal Reserve's actions to support
businesses during this unprecedented time. However, a nmnber of unanswered
questions remain as to eligibility for the PMCCF as pertains to affiliate issuers,
holding companies, U.S. subsidiaries of foreign parents, and ratings considerations.
• Are affiliate issuers with the same parent able to access the PMCCF if they
independently meet the criteria? Is an issuer rating sufficient or must individual
bonds be rated?
Chairman Powell and Secretary 1v1nuchin
April 16, 2020
Page 6
• If the holding company is assumed to be the issuer, how does the issuer account
for bonds and loans issued to third parties via subsidiaries? Is an issuer rating
sufficient or must individual bonds be rated?
• For split-rated issuers, should the higher or lower rating be referenced?
• Are U.S. subsidiaries of foreign parents, with operations primarily in U.S.,
eligible?
• Is eligibility impacted if an issuer is either (i) owned by a foreign parent or (ii)
receives a guarantee from a foreign parent of a U.S. issuer?
• Do secured forms of debt / loans qualify? Do subordinated bonds / loans
qualify?
• \Vill the Federal Reserve consider amending the ratings eligibility to include
additional issuers?
Documentation, disclosures, and operational mechanics
Several key implementation questions remain outstanding as issuers consider
accessing the PMCCF.
• Who is responsible for setting and approving the list of participants?
• \Vhat documentation, disclosures or other readiness must be undertaken by
participants?
• Is there a date by which participants need to sign up to access this facility?
• Is the PMCCF available to participants during an issuer's blackout periods?
• D oes the facility intend on lending out the securities at a future date?
Secondary Market Corporate Credit Facility
The Chamber supports the Secondary Market Corporate Credit Facility (SMCCF) as
it will provide an important source of liquidity in the secondary market to companies
navigating business challenges as a result of the pandemic. The SMCCF, by directly
purchasing corporate bonds and corporate bond portfolio ETFs, will serve as an important
backstop for corporate debt markets. However, the Chamber encourages the Federal
Reserve to consider (1) certain modifications to eligible assets and limits per issuer to
improve access to the SMCCF and (2) clarifying the terms surrounding eligible issuers,
pricing and limits per issuer/ETF, eligible sellers, and documentation, disclosures, and
operational mechanics required to access the SMCCF.
Modifications to eligible assets and limits per issuer
The SMCCF has the capacity to help a large portion of the market. However, we are
concerned that given the terms and conditions of the facility only a small portion of the
Chairman Powell and Secretary 1v1nuchin
April 16, 2020
Page 7
market that requires assistance will actually be able to avail themselves of the SMCCF.
T o ensure that the facility is as impactful as intended, we recommend that the Federal
Reserve consider increasing from 5 to 10 years the final maturity of eligible bonds to
expand the reach of the program. \Ve also recommend an increase from 1.5% to 2.0%
the per issuer cap of the total program size to accommodate issuers with larger debt
footprints in the market.
Other eligibility, pricing, and limits per issuer / ETF considerations
\Ve believe greater clarity is required to address the following additional eligibility,
pricing, and limits questions.
• \X!ho is responsible for setting and approving the list of participants?
• Are U.S. investors with a foreign parent considered eligible sellers?
• How will "fair market value" pricing be determined?
• Could issuers sell their own debt to the facility that have been purchased in the
secondary markets through the ordinary course of market-making?
• How will the Fed allocate the capacity firms could utilize by issuer or seller?
Participation of U.S. branch or agency of a foreign bank
The revised term sheet published on April 9, 2020, now includes a definition of eligible
seller.3 The eligibility of a branch or agency of a foreign bank should be clarified.4
D ocumentation, disclosures, and operational mechanics
Several key implementation questions remain outstanding as issuers consider accessing
theSMCCF.
• \X!hat documentation, disclosures or other readiness must be undertaken by
participants?
• Is there a date by which participants need to sign up to access this facility?
• Does the facility intend on lending out the securities at a future date?
• Does the Fed intend on holding these purchased assets to maturity?
3
The term sheet for the SMCCF now notes "[e]ach institution from which the Facility purchases securities
must be a business that is created or organized in the United States or under the Jaws of the United States
with significant U.S. operations and a majority of U.S.-based employees."
https://www.federalreserve.gov/newsevents /pressreleases/files /monetar_y20200409a2.pdf
4
See similar comments above regarding the eligibility of a U.S. branch or agency of a foreign bank to
participate in TALF
Chairman Powell and Secretary 1v1nuchin
April 16, 2020
Page 8
Municipal Liquidity Facility
The Chamber supports the Federal Reserve establishing the Municipal Liquidity
Facility (MLF). The facility will purchase up to $500 billion of short-term notes directly
from U.S. states (including the District of Columbia) and certain cities and counties. The
revenue disruption caused by the coronavirus crisis has severely strained the short-term
finances of state and local governments. Businesses of all sizes depend on the critical
services provided by state and local governments - maintaining roads, public safety,
healthcare, etc. - to operate their businesses. The continuity of these critical services is
especially important during this time of uncertainty. The below recommendations are
intended to enhance the MLF.
Expand to more issuers
The Municipal Liquidity Facility is restricted to only the largest issuers. 5 This means
the vast majority of cities and counties will be ineligible for their debt to be
purchased by the MLF. It appears that independent authorities and nonprofit entities
are also excluded from the definition of eligible issuer, but this is not clear on the
term sheet.
The MLF term sheet suggests eligible issuers may provide liquidity to other issuers.6
We welcome this suggestion, but it is not immediately clear to us that that eligible
issuers would make use of this option. Using eligible issuers as intermediates is
impractical and would likely distort the market. Most states and large cities - the
eligible issuers - are facing their own fiscal challenges and thus will not likely be
completely ameliorated by the MLF. Therefore, it is highly unlikely they would
provide liquidity to other issuers. Furthermore, this would require eligible issuers to
assume the credit risk of non-eligible issuers, which seems unlikely given the
economic uncertainty. Additionally, it is unclear how many states have the authority
in their constitutions to lend to cities and municipalities. It is also not immediately
clear if eligible issuers have the operational capability to facilitate liquidity for other
issuers, but it is reasonable to conclude they would endeavor to do so if provided
additional funding.
5
MLF term sheet states Eligible issuers include "U.S. states, counties with a population of at least two
million residents, and U.S. cities with a population of at least one million residents."
h ttps: //,vww.federalreserve.gov /newsevents /pressreleases/ files / monetary20200409a3 .pdf
6
Ibid. "An Eligible Issuer may use the proceeds of the notes purchased by the SPV to purchase similar
notes issued by, or otherwise to assist, political subdivisions and instrumentalities of the relevant State,
City, or County for the purposes enumerated in the prior sentence."
Chairman Powell and Secretary 1v1nuchin
April 16, 2020
Page 9
The 11LF should include an additional allocation of funds to eligible issuers
providing liquidity to other issuers. In other words, eligible issuers should be
permitted to sell notes to the MLF from other issuers that do not count towards the
cap of "up to an aggregate amount of 20% of the general revenue ... for fiscal year
2017." Otherwise, it seems unlikely that eligible issuers will allocate funding away
from their own financing challenges.
Clarify the funding rate
The term sheet does not describe the interest cost to the issuer. The term sheet
simply states that "Pricing will be based on an Eligible Issuer's rating at the time of
purchase with details to be provided later." The :tv1LF's required return will clearly
determine how much it is used by issuers compared to other funding options.
Commercial Paper Funding Facility
The Chamber wrote to the Federal Reserve Board and the Treasury D epartment on
March 31, 2020, regarding the Commercial Paper Funding Facility. Our letter requested the
CPFF be expanded to include Tier 2 issuers and split issuers of commercial paper in order
to promote more liquidity in this market without subjecting the facility to substantially
higher credit risk. 7 The Federal Reserve - including in its April 9, 2020 announcement
regarding other 13(3) facilities - has not indicated if the CPFF will be expanded.
Mortgage Servicing Liquidity
Notably absent from the Federal Reserve's announcement is a liquidity facility to
manage the challenges facing servicers in the mortgage market. The federal government has
instituted broad forbearance policies but has not provided any liquidity backstop to support
the market. Forbearance imposed by the federal government temporarily disrupts the
necessary cashflow to for payments that are obligated to investors. The Chamber
recommends the Federal Reserve work with the Treasury Department reduce the
uncertainty that is currently plaguing this market by providing a liquidity backstop through
the creation of an additional 13(3) facility.
7
U.S. Chamber of Commerce, Commercial Paper Funding Facility issuer eligibility, [Letter written March
31, 2020 to the Federal Reserve Board and Treasury D epartment] available at
http: I I www.centerforcapitalmarkets.comlwp-
contenti uploadsl2020 I 041200331 CoalitionComments CommercialPaperFundingFacilitv Fed Treasurv
-Final-3.31 .20.pdf?#
Chairman Powell and Secretary 1v1nuchin
April 16, 2020
Page 10
This facility should not include any of the corporate governance restrictions that are
described in the CARES Act. The CARES Act does not specifically contemplate a
mortgage servicing liquidity facility and therefore there is no clear direction from Congress
about imposing restrictions on the firms that may elect to use this funding source.
Furthermore, where the CARES Act does contemplate corporate governance restrictions
(which the Treasury Secretary authority has the authority to waive), they are only applicable
to fending programs; they are no t applicable to securities.
Closing
Thank you for considering our input regarding liquidity challenges in our financial
markets and our comments on the programs you have proposed to ameliorate these issues.
The Chamber is supportive of your efforts and stands ready to assist you with maximizing
the benefits of these programs.
The Chamber supports the Federal Reserve providing short-term liquidity during
this time of crisis, but we believe it is important that the private market remain the long
term provider of liquidity to the economy. The Federal Reserve serves a vital role as the
lender of last resort, which is absolutely required under current economic conditions.
Private capital should not be crowded in the long nm including when the market is not
demonstrating signs of severe stress.
Finally, we are prepared to work with the Treasury D epartment and the Federal
Reserve to request more ftmding from Congress to backstop 13(3) programs if it becomes
clear the liquidity challenges facing the market are more severe than have been previously
contemplated.
Very Respectfully,
(V
T om Quaadman
Cc: Peter Phelan, Deputy Assistant Secretary, U.S. Department of the Treasury
•
April 16, 2020
The Honorable Steven T. Mnuchin
Secretary of the Treasury
U.S. Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, D.C. 20220
The Honorable Jerome H. Powell
Chairman
Board of Governors of the Federal Reserve
20th Street and Constitution Avenue NW
Washington, D.C. 20551
Dear Secretary Mnuchin and Chairman Powell:
The Board of Governors of the Federal Reserve System (the "Board") and the
Department of the Treasury have taken extraordinary, unprecedented steps in recent
weeks to facilitate the recovery and reopening of the American economy. Despite the
creation of numerous loan and liquidity facilities, however, including two "Main Street"
loan facilities, there is presently no facility through which AMC Theaters-the
quintessential Main Street business-is eligible to borrow. With movie theaters shut
down by government orders to prevent the further spread of COVID-19, AMC has no
revenue. And with no relief available from CARES Act programs designed to provide
"economic stabilization and assistance to severely distressed sectors of the U.S.
economy," AMC will soon have no choice but to shut its doors permanently, forcing not
only the permanent layoff of tens of thousands of workers but also significant changes
in the American cultural landscape.
As you are aware, there is presently a gap in the Board's economic recovery programs
that jeopardizes hundreds of thousands of American jobs. Larger non-investment-grade
employers with more than 10,000 employees and $2.5 billion in 2019 revenue do not
qualify for the Paycheck Protection Program, the Main Street New Loan Facility, the
Main Street Expanded Loan Facilities, or the Primary Market Corporate Credit Facility
11500 Ash Street, Leawood, KS 66211
913.213.2100
•
(unless those companies were recently downgraded from an investment-grade
rating). Beyond AMC, this class of businesses includes many well-known household
brands across virtually every American industry-from manufacturing to services
providers to gaming to retail.
Given that only about half of the $454 billion Congress appropriated to the Treasury
Department in the CARES Act is providing credit support to these existing facilities, it is
possible that the Board and Treasury are currently considering a lending facility that
would be available to AMC and other larger employers. AMC appreciates the
considerations your agencies undertake when creating emergency lending programs,
principally the Board's exposure to credit risk. Sensitive to this dynamic, AMC urges
your agencies to use the remaining money to establish a new lending facility (or expand
existing facilities) to permit borrowing to larger non-investment-grade companies on
terms that maximize leverage of the Treasury's equity contributions. These terms could
include a requirement that the borrower provide new security for the loan, such as
a lien, bond, secured affiliate guarantee, or other credit support. The lending program
could also require that the government' s position in the borrower's capitalization not
exceed a specific leverage. This type of secured lending program would enable
Treasury's limited CARES Act funds to continue to attract relatively high Federal Reserve
leverage to create a large enough lending program for companies that don't otherwise
qualify for assistance. Borrowers that are not able to offer security would either not
qualify or would be subject to other covenants to provide the Federal Reserve additional
credit support (e.g. an overall debt coverage ratio). In any case, flexibility on loan terms
should be the primary driver of any such lending fund.
We also suggest that you waive any existing rules that may impede recovery due to the
current pandemic. For example, because the CARES Act (Section 4003(c)(3)(C)) applies
all applicable requirements of section 13(3) of the Federal Reserve Act to CARES
Act section 4003(c) loans, the solvency requirements contained in 12 C.F.R. §
201.4(d)(S)(iii)(B) may prevent closed consumer facing businesses from qualifying for a
lending facility. Clearly, companies that have been ordered closed by state governments
and have no income may not be able to overcome the strict definition of "insolvency" in
regulations not meant to address the need to stabilize a pandemic induced
economic shutdown.
11500 Ash Street, Leawood, KS 66211
913.213.2100
•
We appreciate all you are doing to both stabilize the economy and position it for a rapid
recovery. AMC Theatres should be part of that recovery because of our important role
in local economies, including boosting foot traffic to nearby retailers and serving as
desirable anchor tenants in mixed-use developments and shopping centers. The movie
exhibition business is in distress and is the very types of business Congress intended to
help with the CARES Act. Therefore, we urge you to ensure that Treasury and the
Federal Reserve establish a flexible lending facility available to companies in a distressed
financial condition directly tied to the global pandemic.
I appreciate your attention to these comments.
Sincerely,
Adam Aron
CEO and President
AMC Entertainment Holdings, Inc.
11500 Ash Street, Leawood, KS 66211
913.213.2100
MOMA
1333 H Street, NW
Suite 400W
Washington, DC 20005
MEDICAL DEVICE MANUFACTURERS ASSOCIATION Phone (202) 354-7171
Fax (202) 354-7176
www.medicaldevices.org
April 16, 2020
Via Electronic Submission
The Honorable Steven Mnuchin The Honorable Jerome Powell
Secretary of the Treasury Chairman ofthe Board of Governors
U.S. Department ofTreasury Federal Reserve System
1500 Pennsylvania Avenue N.W. 20th Street & Constitution Avenue N.W.
Washington, D.C. 20220 Washington, D.C. 20551
RE: Recommendations for Updating Main Street Business Lending Program
(MSLP) Term Sheets to Provide the Greatest Access to the Program
Dear Secretary Mnuchin and Chairman Powell,
On behalf of the Medical Device Manufacturers Association (MDMA), a national trade
association representing hundreds of innovative and entrepreneurial companies in the field of
medical technology, I want to thank you for your coordinated and decisive actions to address the
unprecedented economic challenges our countly is facing as a result of the COVID-19 pandemic.
Initiatives underway at the Department of Treasury and the Federal Reserve will serve as the
financial backbone to support and help small, medium and large companies. More importantly,
the programs enacted under the "Coronavirus Aid, Relief, and Economic Security (CARES)" Act
will help medical technology employees weather this crisis, while empowering our members to
continue developing lifesaving and life-changing innovations, and bridging the gap with the
necessary liquidity that will allow our economy to thrive once again. I am writing to provide
term sheet recommendations, for both the new and expanded loan facilities, that will ensure the
program functions in an effective and efficient manner and is accessible to all companies within
specified employment ranges and revenue thresholds.
MDMA provides educational and advocacy assistance to innovative and entrepreneurial
medical technology companies, and it is our mission to ensure that patients have timely access to
safe and effective medical products that improve health outcomes. Our members, the majority of
which are small to mid-sized medical device companies, have a strong record of delivering
innovative therapies to patients suffering from chronic diseases and life-threating conditions,
while lowering the cost of care. Our industry is responsible for significant advances in patient
care over the years, including transcatheter heart valves, implantable cardiac defibrillators,
cochlear implants and countless other innovations. Such advances have vastly improved
treatments for medical conditions like heart disease, cancer and stroke - annually among the
leading causes of death for Americans each year.
Small to mid-sized medical technology companies are an integral part of the medical
device industry ecosystem and responsible for a majority of the truly novel and disruptive
medical technology innovations that have improved the way of life for so many patients. These
efforts can take many, many years and hundreds of millions of dollars before an idea can
ultimately reach patients and address unmet needs. It can take decades for these highly regulated
and capital-intensive companies to reach profitability and sustainability. Swift and meaningful
action to meet the current health and economic crisis is paramount to help these companies
survive and ultimately fulfill their mission to deliver new therapies to patients in need.
As you can imagine, the road for these small to mid-sized medical technology companies
includes a significant number of challenges in the best of times. However, the COVID-19
pandemic has materially increased these uncertainties. Like many other sectors ofour economy,
the pandemic is adversely impacting many ofour members' businesses. At a White House Task
Force Press Briefing on March 18th, Centers for Medicare & Medicaid Services (CMS)
Administrator Seema Verma announced a federal directive recommending a deferral of all adult
elective surgeries, non-essential medical, surgical, and dental procedures during the COVID-19
response. We understand the necessity of these actions and support them; however, we also
believe reciprocal action is warranted to ensure that the companies MOMA represents, which
also supply the products for these deferred procedures, can survive until COVID-19
countermeasures are lifted and elective procedures are allowed to resume.
As currently structured, the draft terms sheets for both the Main Street "new" loan facility
and the "expanded" facility appear to exclude many innovative medical technological companies
that treat cancer, cardiovascular disease, neurological disorders and other critical conditions.
Specifically, all companies who have expenses that exceed revenues would be excluded under
the threshold set to establish the maximum amount for a loan. Terms in the new loan specify that
the maximum loan size cannot exceed four times 2019 EBITDA and expanded loan terms
indicate that the maximum loan size cannot exceed six times 2019 EBITDA. In addition,
successful companies prior to the COVID-19 pandemic with greater leverage would be excluded.
It is understandable that the Federal Reserve and Treasury need to explore ways to minimize risk
for loans . However, many emerging and successful medical technology companies would be
excluded from this critical liquidity lifeline without modifications.
1n an effort to realize the full impact of the Main Street program and the Administration's
desire to ensure liquidity for all small to mid-sized businesses that need it, MDMA strongly
encourages the Federal Reserve and Treasury to make the following improvements to the Draft
Term Sheets for the Main Street New Lending Programs:
I) Modify the current methodology for the maximum loan amount under MSNLF to
include two additional options: I) an unsecured loan up to $15M that would not
require the EBITDA/leverage analysis (the $25M maximum would remain with the
current thresholds in place); and 2) an unsecured loan of up to 0.5xEBITDA for
companies that are currently above the EBITDA/leverage thresholds;
2) The loan should be subordinate to any other loans;
3) Participating banks would be a) required to provide such loans outside of any existing
debt covenants and not accelerate any existing covenant provisions, and b) prohibited
from increasing interest rates on any existing loans due to perceived increased risk;
4) Loans would be structured as cash or paid-in-kind interest, due upon a change-in
control or after any existing credit faci lities; and
5) Loans would not be overly restrictive, including limitations that increase the amount
of debt required to stay afloat. We encourage the administration to allow companies
to util.ize the necessary tools to lower the amount of debt needed for liquidity and
sustainability.
Thank you for the consideration ofour comments and perspectives. I hope you will move
quickly to update the Main Street Lending Program Term Sheet to ensure that all small and mid
sized medical technology companies and their employees have the opportunity to access these
critical funds and continue their important work to improve patient care.
Pl.ease email me at mark.lcahey@mcdicaldcviccs.org with any follow up questions, concerns or
clarifications.
Sincerely,
IJIJJ-t.t~
Mark B. Leahey
President & CEO, MOMA
w
UN IBA IL-ROD AMC 0-W EST FIE LO
April 15, 2020
The Honorable Steven Mnuchin The Honorable Jerome Powell
Secretary Chair
U.S. Department of the Treasury Federal Reserve Board of Governors
1500 Pennsylvania Ave NW 20th Street and Constitution A venue NW
Washington, DC 20220 Washington, DC 20551
The Honorable Jovita Carranza
Administrator
U.S. Small Business Administrator
409 3 rd Street SW
Washington, DC 20416
The Honorable Mitch McConnell The Honorable Charles Schumer
Majority Leader Minority Leader
U.S. Senate U.S. Senate
S-230, U.S. Capitol S-221, U.S. Capitol
Washington, D.C. 20510 Washington, D.C. 20510
The Honorable Nancy Pelosi The Honorable Kevin McCarthy
Speaker Minority Leader
U.S. House of Representatives U.S. House of Representatives
H-232, U.S. Capitol H-204, U.S. Capitol
Washington, DC 20515 Washi ngton, DC 20515
Dear Secretary Mnuchin, Administrator Carranza, Leaders Pelosi and McCarthy, and Leaders McConnell
and Schumer:
On behalf ofthe employees and leaders at Unibail-Rodamco-Westfield ( "Westfield"), I would like to thank
each of you for your leadership and dedication in c rafting urgent responses to the COVID-19 crisis (the
" crisis"). As your negotiations continue, I implore you to pursue policies aiding the brick-and-mortar
shopping center industry significantly impacted by the crisis .
Westfield's 32 U.S. shopping centers and retail operations at five major airports e ncompass a myriad of
small and mid-sized businesses, with our tax and infrastructure investments directly supporting our
communities. n the past year, Westfield centers in the U.S. hosted more than 100,000 retail e mployees and
welcomed over 400 million visitors, generating more than $ 1.1 billion in annual sales lax. In Los Angeles,
home to our U.S. headquarters, Westfield is the second-largest private employer when aggregating the
workforce at our six centers in Los Angeles County. Additionally, in New York City, Westfield World
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Trade Center 's famous Oculus welcomes millions to the city. Westfield's centers also yield tangible social
and environmental be nefits, by committing to reduce its carbon emissions globally by 50% through its
Better Places 2030 CSR strategy and engaging locally with mo re than 100 charitable partners in the U.S.
Early in the crisis, Westfield joined the collective fight against the coronavirus outbreak and temporarily
closed its o peratio ns to protect its customers, employees, tenants, and broader communities. The ripple
effect from the crisis is clear and immediate : our employees, tenant businesses, and local municipalities are
all suffering. Support for Westfield and similar organizations is especially urgent because it will bring
tangible benefits to our retail partners and the communities in whi.c h we operate. To ensure Westfie ld and
its partners the best chance of effective recovery, we urge you to consider the prio rities below.
Treasury, SBA, and Congress should adjust the Paycheck Protection Program (PPP) to support retail
businesses: Westfield confronts a si mple truth: many of o ur small busi ness te nants and partners cannot pay
their rent obligations and will continue to delay such rental payments until after their businesses are no
lo nger affected by the crisis. We are trying to support our tenants dur ing this time and have provided them
with resource materials to help them navigate through the federal lending programs such as the PPP loan
program. However, in its interim final rule for PPP, Treasury and SBA limited 25% ofthe loan's forgivable
amount to non-payroll costs, in a departure from the guidelines underlying the CAR ES Act.
We agree with a recent communication from colleagues at the National Retail Federatio n (NRF), American
Hotel and Lodging Association (AHLA), the US Travel Association (USTA), the National Restaurant
Association (NRA), and the International Franchise Association (IFA) who argue that the 25% limitation
takes away small business owners' discretion to use funding as they need. In fact, this requirement could
encourage borrowers to neglect their rent and debt obligations out of worry this spending would not be
forgiven. This is a counterproductive idea that would place businesses at further risk. Retail tenants, and
small business owners overall, should have as much flexibility as possible to use forgivable PPP funds
towards any allowable use of a covered loan described in 1102 of the CARES Act.
Westfield further agrees with colleagues in NRF, AHLA, USTA, JFA, and the NRA in urging Congress to
amend Sec.1102(a)(D)(iv) of the CARES Act to allow businesses in retail trades (NAICS 44-45), with
multiple physical locations, but less than 500 employees per location, to receive PPP loans.
Treasury should include retail shopping centers as eligible for Title IV aid: As Treasury prepares aid
to distressed industries under Title IV of the CARES Act, we add Westfield's voice to retail and real estate
industry leaders such as the International Council of Shoppine. Centers OCSC), the National Retail
Federation, and others seeking the explicit inclusion of retail shopping centers as eligible for the evolving
Title IV loans and loan guarantee programs. Specifically, Westfield asks for the following clarifications :
Ensure that the proceeds from Title IV loans can be used to refinance or pay-off CMBS debt of the
eligible business entity borrower or its subsidiaries before the debt maturity date. Given the nature of
retail real estate, the unforeseen crisis has led to significant near and mid-term uncertainties that could not
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have been contemplated when prudent borrowers and conservative lenders entered into C MBS financing
arrangements prior to the crisis. Congress' intent in Title IV is to create liquidity and stabilize the economy.
We believe this clarification will support those goals by allo wing retail real estate borro wers to refinance
the terms ofC MBS debt and prevent potential defaults and foreclosure under existing loan documents while
their traditional business models reliant on social gathering and human connection normalize after this
crisis.
Ensure that an SPE Borrower or a Joint Venture owning an SPE Borrower which existed before the
crisis qualifies as an eligible business: W estfield, like many retail real estate investors, invests in Joint
Ventures with other investors, and those JVs in turn hold 100% of the equity in special purpose entities (an
SPE Borrower) that hold the fee simple interest in the shopping malls that have been prudently financed
with commercial mortgage backed securities (CMBS) loans secured by the real estate. We urge Treasury
to account for this reality in its forthcoming el igib ility rules to ensure that the JVs and entities that have
legal ownership of retail shopping centers may apply for loans and loan guarantees under this program to
help preserve jobs and local tax revenue and keep the shopping centers o ut of possible foreclosure in this
unprecedented health and econo mic crisis.
Clarify that the 4003(b)(4) requirements apply to an eligible business entity borrower and not its
investors, contractors, vendors and tenants. Given the equity ownership structure of a shopping center,
different investors have differe nt economic situatio ns and legal requirements and could not feasibly be
bound by the requirements of the Title 4 programs for their separate enterprises. For example, many
investors may be REITs that could not be bound by restrictions o n dividends and other capital distributions,
especially as a result of an action taken by one of many lower tie r investments. Accordingly, it is important
to clarify that the Title 4 requirements only apply to the eligible business entity that is the borrower under
the Title IV loans and loan guarantee programs, and no t to its investors, contractors, vendors, and tenants.
Use the definition of "effectively connected" under U.S. tax principles for an otherwise-eligible
business entity to meet the US-based employee, organization and operation requirements of the
program. As d iscussed above, Westfield centers provide significant U.S. employme nt platforms, with U.S.
based operations domiciled and physically located in US communities, creating substantial local tax
revenues for governments across the country. While the CARES Act, as written, appears to include U .S.
mall owning entities in its deftnition of U .S. companies, as Treasury negotiates the detai ls, we urge your
offices to consider using the definition of"effectively connected" under the U.S. tax principles to designate
an eligible U.S. business.
Additional considerations critical to the Retail Real Estate Industry. The crisis has led to an emergency
situation today that may or may not abate in the near future. However, shopping centers in particular rely
on social gathering and human connection and it will take some tin1e after the crisis for that to normalize. In
fact, it could take quite a bit more time than the rest of the economy to recover after the she lte r in place
orders are lifted. In light of that mid-term uncertainty, we are urging the government to step in and bridge
the gap and help the indus try modify inflexible legacy C BMS debt agreements that were entered into
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between prudent borrowers and lenders at a time when they never could have reasonably contemplated this
risk. Over the long term the pro perties are vital and viable businesses and can conservatively support debt
financing. The following considerations should be prioritized by Congress in future legislation: (a)
industry wide economic and noneconomic forbearance or deferral on commercial CMBS debt for the retail
real estate industry, (b) measure to grant the master servicers the authority to make modifications to CMBS
loans to address issues resulting from this crisis without transferring loans to special servici ng, and (c)
measures to permit the modification of CMBS loans to allow early pay-off/refinancing without a
prepayment penalty.
Congress should create a Business Resumption Fund and PRIA protection against future
interruptions: Retail centers, along with many of our tenants, are negotiating with our insurance providers
to file claims for business interruptions resulting from the COVID-19 pandemic, especially governme nt
ordered closures. We join with colleagues at the ICSC in urging Congress to develop a vehicle to guarantee
or directly support business interruption coverage for shopping centers, retailers, restaurants, and similar
businesses still reeling from the c urrent pandemic.
Further, Westfield supports a now-circulating proposal to create a Pandemic Risk Insurance Act (PRIA),
modeled on the post-9/11 Terroris m Risk Insurance Act (TRIA). While establishment of PRIA would not
address the retail sector's most recent concerns with business interruption insurance, the next COVID-19
response bill presents a clear opportunity for Congress to move proactively to prevent a similar blow to the
U.S. economy in the future.
Again, we thank you for your leadership, time, and attention as you develop additional responses to
COVJD-19. Should you have any questions or feedback to Westfield's priorities, please contact Westfield's
Executive Vice Preside nt for Public Affairs Marcus Reese at marcus.reese@ urw.com
Sincerely,
Jean Marie Tritant
President, United States
Unibail-Rodamco-Westfield
CONSUMER
BANKERS
ASSOCIATION
April 15, 2020
VIA ELECTRONIC SUBMISION
Chair Jerome H. Powell
Board of Governors of the Federal Reserve System
20 th Street and Constitution Avenue, N.W.,
Washington, DC 20551
Re: Federal Reserve's Main Street Lending Program
Dear Chair Powell:
1i 25 Eye Street, NW, Suite 550, Washington , DC 20005
consumerbankers.com
The Consumer Bankers Association ("CBA") 1 appreciates the opportunity to comment on the Federal
Reserve's Main Street Lending Program ("Main Street"). CBA applauds the Federal Reserve for swiftly
acting to aid America's small- and mid-sized businesses as we endure the uncertainties presented by the
COVID-19 crisis. CBA has reviewed the details of the Main Street Lending Program ("the Program") and
has some suggestions the Federal Reserves should consider before finalizing the details of the Program.
Maximum Loan Size
To begin, both the Main Street New Loan Facility ("MSNLF") and the Main Street Expanded Loan
Facility ("MSELF") base their maximum loan size on the 2019 EBITDA. The maximum loan for new
loans under the MSNLF is the lesser of (a) $25 million, or (b) an amount that, when added to the
borrower's existing outstanding and committed but undrawn debt, does not exceed four times its 2019
EBITDA.2 Similarly, the maximum loan size for an upsized existing loan under the MSELF is the lesser
of (a) $150 million, (b) 30% of the borrower's existing outstanding and committed but undrawn bank
debt, or (c) an amount that, when added to the borrower's existing outstanding and committed but
undrawn debt, does not exceed six times the borrower's 2019 EBITDA. 3
In regards to the MNSLF, CBA believes the requirement stating Eligible Borrowers may only have debt to
EBITDA of four times and under should be changed. We recognize this requirement is intended to keep
riskier borrowers out of the program, but we believe the terms as written will have the opposite effect.
High leverage is not an indicator of borrower weakness. On the contrary, high leverage occurs because
sophisticated lenders are prepared to put a great deal of money at risk on a non-recourse basis and with
little in hard assets because they are confident borrowers, in normal circumstances, will be able to service
and repay the debt. However, it is the more risky, cyclical borrowers who have debt levels below four
times. We encourage the Federal Reserve to increase the maximum loan size for the MNSLF to a level
which better considers the appropriate amount of leverage in the respective industry. If thousands of
companies are unable to access these resources, the consequences could be catastrophic in terms of
endless downsizings and a massive and permanent loss of investment capital.
Furthermore, the Federal Reserve may want to consider sector specific guidance, specifically for
industries with higher leverage. For example, many businesses suffering from the COVID-19 pandemic
also suffered in 2019 due to the trade war with China and felt the early supply chain disruptions in China.
Some China exposed firms would presumably not qualify, unless EBIDTA allows legitimate defined
adjustments. Another industry which seems to have been overlooked is the Commercial Real Estate
Industry. Owner occupied or investor deals, including development, which would not be measured on an
EBITDA basis, but ideally, they would be eligible for assistance if the firms have employees and/or an
impaired rental income flow due to the pandemic.
11 The Consumer Bankers Association partners with the nation's leading retail banks to promote sound
policy, prepare the next generation of bankers, and finance the dreams of consumers and small businesses.
The nation's largest financial institutions, as well as many regional banks, are CBA corporate members,
collectively holding two thirds of the industry's total assets.
2 Federal Reserve, Main Street New Loan Facility Term Sheet,
https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200409a7.pdf (April 9, 2020).
3 Federal Reserve, Main Street Expanded Loan Facility Term Sheet,
https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200409a4.pdf (April 9, 2020).
2
Minimum Loan Size
CBA believes the Federal Reserve should lower its minimum loan amount to significantly less than $1
million. Based on the current terms, there is a potential for a "donut hole" with businesses potentially
falling between the Small Business Administration's ("SBA's") Paycheck Protection Program ("PPP")
and Main Street. Rather than focusing on excluding risk businesses, the Federal Reserve should identify
the overlap where "large" small businesses and small "mid-size" businesses meet.
If the Federal Reserve plans to use loan size as a proxy for Main Street, then it should look at the SBA's
PPP loans as a metric for where to set the minimum loans amounts for the Main Street Lending Program.
SBA released data on April 13, 2020 detailing the loans approved through ETRAN. 70% of the loans
were less than $350k. While an imperfect comparison, this presents sound reasoning to reduce the
minimum loan amount for the Main Street Lending program to roughly $350k. CBA believes a concentric
circle of overlap between the programs would be ideal, while a gap would leave businesses without
adequate support in the midst of an unprecedented crisis.
In addition, CBA performed a cursory analysis of its membership to help quantify the donut hole between
the Main Street Lending Program and PPP. We identified the dominant cause of the gap is the interaction
between the EBITDA and the $1 million minimum in the Main Street Lending Program. Analysis from
our membership suggests thousands of mid-size companies could be too large for the SBA program yet
fall below the $1 million loan minimum. One estimate indicates that 175,000 businesses, with an average
annual revenue of $15 million, would be served by reducing the loan minimum to $500,000. Furthermore,
we believe there should be flexibility in the length of the loans of the Main Street Lending Program. CBA
would prefer to see loan terms range from four to six years.
Clarity in Terms
The Federal Reserve should clearly define terms for banks to operationalize the Main Street Loan
Program. CBA encourages the Federal Reserve to define "debt." EBITDA is not a defined term under
GAAP. Also, based on the Federal Reserve's current guidance about the Program, it seems if the
definition of debt includes senior, mezzanine and subordinated debt, it may exclude many businesses in
need. In addition, the Federal Reserve states the pricing on loans will be an adjustable rate of
SOFR+250-400 bps, but there is no indication how SOFR is calculated, e.g. SOFR Compounded in
Advance, SOFR Compounded in Arrears, or Daily Simple SOFR in Arrears.
Official Guidance
CBA urges the Federal Reserve to issue guidance to eligible lenders and borrowers in a prompt and
complete manner. CBA member banks are ready to do their part to help stabilize and restart the economy,
but we will need timely and thorough guidance to help our banks lend and to help America's businesses
responsibly borrow. CBA also implores the Federal Reserve to continue to seek feedback once the facility
is open to continue to ensure the Main Street Lending Program is working as intended. Please provide
more clear guidance. CBA has included an appendix with a list of technical questions intended to generate
clear and comprehensive guidance for financial institutions.
On a separate but related issue, CBA encourages the Federal Reserve to not change any existing
regulatory tiers for financial institutions who choose to participate in this facility. During the duration of
the Main Street Lending Program, banking organizations should retain their respective category in regards
to the application of enhanced prudential standards. Asset sizes of banks will likely increase dramatically
during the duration of the COVID-19 crisis as they participate in the Main Street Lending Program and
3
other Federal Reserve and government-sponsored programs aimed at supporting the American economy
during this time.
******
Again, CBA fully supports the Federal Reserves efforts to aid small- and mid- sized businesses during
these unprecedented times. CBA sincerely wants to see the Federal Reserve's Main Street Lending
Program as effective as possible for the countless American businesses who stand in need.
If you have any additional questions or concerns, please do not hesitate to contact Andre Cotten at
202-552-6360 or at Acotten@consumerbankers.com.
Sincerely,
e. !1Jb
Andre B. Cotten
Assistant Vice President, Regulator Counsel
Consumer Bankers Association
1225 New York Avenue
Suite 1100
Washington, DC 20005
Appendix to the CBA's Comment on the Main Street Lending Program
Borrower Eligibility
How are 10,000 employees calculated? Are their affiliation rules similar to the SBA's Paycheck
Protection Program?
Will U.S . based subsidiaries of non-U.S. parent companies be deemed eligible borrowers if the
majority of its employees are located in the U.S.?
Can Main Street Loans be made on a consolidated basis to co-borrowers or must it be to a
single-borrower?
General Loan Features
Will the Federal Reserve provide standard loan documents or will documents be negotiated by
each lender?
4
Will the Federal Reserve provide a standard participation agreement for each loan or will the
participation terms be set out as part of the program guidance? Will SPV's participation function
as a true sale of the loan? Will the SPV have voting and consent requirements in the servicing of
the loan?
What are the mechanics of funding and the participation purchase? What conditions precedent
exist for funding?
What risk weighting will be assigned to these loans?
Are the loans fully funded at closing or may the loans have a draw feature?
Does the loan have to amortize over the 3 year payment period or may there be a balloon?
Straight line or escalating?
Are there loan to value or any other credit qualification requirements?
How will SOFR be defined or measured? Who sets the pricing between 250 and 400 bps?
EBITDA calculations:
o Does the EBITDA have to be determined from 2019 audited financial statements subject
to GAAP? What if audits have been delayed due to COVID-19?
o How will one-time 2019 expenses be handled when calculating EBITDA?
o Will EBITDA be allowed to be defined based on existing lending facilities?
o Will there be any leverage exceptions for commercial real estate companies, non-profits
or other industries, which are not typically measured by EBITDA?
Fees
o Are closing costs and outside counsel fees permitted?
o How are servicing fees paid out? Up front or at the end of the year?
Expanded Loan Facility
What is the definition of "existing, outstanding and committed but undrawn debt"? Are these
limited to committed sub-facilities or all revolving lines? To clarify, discretionary, uncommitted
lines of credit would not be considered?
Will the SPV provide consents and waivers in loan arrangements where all lenders must consent?
If not, it could create risk on existing loan documentation?
Existing loans that are part of a syndicated facility or subject to intercreditor agreements may be
excluded from the program without clear guidance on the management by SPV and use of
proceeds.
Can lenders lower the loan to a lower leverage?
Should the terms, amortization and other covenants match the existing facility or is the upsize
tranche option meant to be a separate "cleaner" arrangement?
How will the "pro rata" security interest requirement be implemented? Any exemptions caused by
the dilution of collateral under the terms of existing facility?
Required Attestations
How can a lender attest that loan proceeds will not be used to repay or refinance pre-existing
loans or lines of credit other than not accepting payments on such loans for the entirety of the
Main Street Loan? If proceeds are commingled with other Borrower funds, the lender is not in a
position to attest that payments to existing loans or lines were not from Main Street Loan
proceeds. Can revolving credit facilities and other working capital loans be repaid?
What is lender's role in oversight of borrower's attestations/covenants in the loan documents?
o Does a lender have to verify use of proceeds, both in the prohibition of the payment of
other loans or COVID-19 related expenses?
o What level of record-keeping is required to demonstrate the use of loan proceeds?
5
o Does a lender have to investigate that the need for financing was due to COVID-19?
o Does a lender have to review borrower's efforts in maintaining payroll and employment
levels?
o What is a lender's responsibility in monitoring compensation, stock repurchase and
capital distribution restrictions? If it does, how and under what authority does a lender
have to enforce restrictions for the year following repayment?
o Are tax distributions allowed?
What is the definition of "debt of equal or lower priority"? What constitutes a mandatory
principal payment?
o If debt of equal priority may not be paid, does this requirement forbid PPP loans to the
same borrower?
o If a bank has a loan to a borrower who receives a Main Street Loan from another lender
and borrower breaches the covenant of using Main Street Loan proceeds from paying off
pre-existing loans, does the SPV have the right to come after the bank who received the
proceeds?
The summary of the program states that lenders are not able to reduce line of credit availability
after the borrower receives funds. Does this include the situation where the borrower
subsequently defaults? Can a lender enforce its rights under the existing line of credit?
If a borrower obtains a loan via the Programs and later defaults on pre-existing debt with the
bank, is the bank precluded from enforcing defaults on the pre-existing debt? Any limitations in
place?
6
Noah W. Wilcox, Chairman
Robert M. Fisher, Chairman-Elect
Brad M. Bolton , Vice Chairman
Gregory S. Deckard, Treasurer
~ ~NDF.NT COMMUNITY Alice P. Frazier, Secretary
BANKERS ofAMERICA® Preston l. Kennedy, Immediate Past Chairman
Rebeca Romero Rainey, President and CEO
April 16,
2020
The Honorable Jerome H. Powell
Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551
Re: Comments Concerning the Main Street Lending Program
Dear Chairman Powell:
The Independent Community Bankers of America ("ICBA") 1 appreciates this opportunity to
provide comments concerning the Federal Reserve's Main Street Lending Program (the
"Program"). The Federal Reserve announced on April 9, 2020 that it was establishing the
Program to support lending to both small and medium-sized businesses that were in good
financial standing before the onset of the COVID-19 pandemic. The Program will operate
through two facilities: the Main Street New Loan Facility (MSNLF) and the Main Street
Expanded Loan Facility (MSELF).
As described in the term sheets, U.S. businesses are eligible for loans under the Program if they
meet either of the following conditions: (1) the business has 10,000 employees or fewer; or (2)
the business had 2019 revenues of $2.5 billion or less. Loans would have a four year maturity,
and principal and interest payments on the loans will be deferred for one year. The minimum
loan size would be $1 million and the interest rate would be an adjustable rate of SOFR plus
250-400 basis points. Eligible lenders may originate new loans under the MSNLF or increase
the size of (or "upsize") existing loans to eligible borrowers under the MSELF. To implement the
Program, a Reserve Bank will set up a special purpose vehicle (SPY) to purchase 95 percent
participations in loans originated by eligible lenders. Lenders will retain the other 5 percent of
the loans.
1 The Independent Community Bankers of America® creates and promotes an environment
where community banks flourish. With more than 50,000 locations nationwide, community
banks constitute 99 percent of all banks, employ nearly 750,000 Americans and are the only
physical banking presence in one in three U.S. counties. Holding more than $5 trillion in assets,
nearly $4 trillion in deposits, and more than $3.4 trillion in loans to consumers, small businesses
and the agricultural community, community banks channel local deposits into the Main Streets
and neighborhoods they serve, spurring job creation, fostering innovation and fueling their
customers' dreams in communities throughout America. ICBA is dedicated exclusively to
The Niml7itl1111f,fo~}tffJ?~JMWzt?n
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e'ttect1ve acfv'ocacy, 'besr-hH:Iass edueat10n, ana h1g -
W. SHIN T N, DC SAUK CENTRE, MN
l 6 l 5 l Street NW 5 18 Lincoln Road
Sui te 900 PO . Box 267 866-843-4222
Washington, DC 20036 Sa uk Centre, MN 56378 www. icba.org
ICBA's Comments
While ICBA is very appreciative of the Federal Reserve's Payroll Protection Program Lending
Facility (PPPLF) and how it will help Main Street and the liquidity needs of both community
banks and small businesses, we are less enthusiastic about the Program. Although the Program is
referred to the "Main Street Lending Program." it appears to be focused mainly on the mid-sized
businesses when it should be focused on both small and mid-sized businesses.
Our chief concern with the Program is the minimum loan amount of $1 million. If the
Program is going to support both small and medium sized businesses, the minimum loan
amount should be no higher than $100,000. Otherwise, Main Street businesses and
community banks will not participate. For community banks, the average size of an SBA PPP
loan has been around $100,000 and a number of ICBA members have even made PPP loans for
less than $10,000. ICBA surveyed its Board members and few of them expressed any interest in
the Program because of the high minimum loan amount of $1 million even though many of these
bankers were very active lenders in the SBA PPP.
Community banks are also concerned that the Program is too complicated and that there are too
many responsibilities placed on the Lender. To simplify the program and to make it more
attractive, we recommend dropping the requirement that Lenders retain a 5 % interest in
the loan it originates. We believe the loan retention requirement and the risk sharing involved
after the sale unnecessarily complicates the loan sale and the accounting of the transaction
without making the lender any more prudent with its underwriting of the loan.
Furthermore, both facilities--the MSNLF and the MSELF-place a number of restrictions on
both the borrower and the lender. One requirement in the Program requires that the borrower
attest that it will follow compensation, stock repurchase, and capital distribution restrictions that
apply to direct loan programs under section 4003(c)(3)(A)(ii) of the CARES Act. These types of
restrictions raise concerns about the responsibilities of the lender and the extent to which the
lender needs to monitor the corporate activities of the borrower following the origination of the
loan. We strongly recommend that the lender be fully indemnified for all attestations that
the borrower is required to make with respect to Program loans. Lenders do not want to be
responsible for ensuring that the borrower is complying with restrictions on compensation or
capital distributions following the closing of the loan.
We also recommend that the Federal Reserve allow as much flexibility with the terms of
Program loans as possible. For instance, with regard to the 4-year maturity limit, lenders should
Th Abe allowed to make loans with different maturities provided that no Program loan exceeds a term -
e of 4 years. Since borrowers are allowed to defer principal and interest for one year, lenders
should be allowed to amortize the deferred amount over the remaining period of the loan or
alternatively, have the borrower pay it off in one lumo sum at the end of the loan. 843-4222
vliasrnng 1o n, LA.., Lvv.:,u -:>O UK 1...,enrre, JVll'l ..>u.:> 1 o www .icba .org
In short, now that the SBA PPP has run out of money and it is unclear whether Congress will
authorize any more funds for the program, it is critical that the Federal Reserve turn its attention
to making the Main Street Lending Program more attractive to both community banks and small
businesses. Substantially lowering the minimum loan amount, making the Program as flexible as
possible, and providing appropriate indemnitees for the lender will go along with towards
achieving that goal.
Sincerely,
Isl Rebeca Romero Rainey
Rebeca Romero Rainey
President and CEO
The Nation's Voice for Community Banks.®
WASHINGTON , DC SAUK CENTRE, MN
16 15 LStreet NW 5 18 Lincoln Road
Suite 900 PO Box 267 866-843-4222
Washington, DC 20036 Sauk Centre, M N 56378 www.icba org
POGO
PROJECT ON GOVERNMENT OVERSIGHT
April 16, 2020
The Honorable Jerome H. Powell
Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution A venue NW
Washington, DC 20551
Via email: regs.comments@federalreserve.gov
Subject: Comment in Support of Restoring Transparency at the Federal Reserve During the
COVID-19 Pandemic
Dear Chairman Powell:
The Project On Government Oversight (POGO) submits the following comment in support of
restoring some transparency requirements for the Federal Reserve that have been suspended
during the COVID-19 pandemic. Recent changes meant to provide the Federal Reserve with
flexibility are too broad, and we urge the Federal Reserve to continue following the record
keeping requirements per the Government in the Sunshine Act.
POGO is a nonpartisan independent watchdog that investigates and exposes waste, corruption,
abuse of power, and when the government fails to serve the public or silences those who report
wrongdoing. We champion reforms to achieve a more effective, ethical, and accountable federal
government that safeguards constitutional principles.
Section 4009 of the Coronavirus Aid, Relief, and Economic Security Act (Pub. L. 116-136)
exempted the Federal Reserve from key provisions of the Government in the Sunshine Act
should the chairman determine there were "unusual and exigent circumstances." 1 The landmark
Government in the Sunshine Act governs public notice and record-keeping requirements for
meetings of federal agencies. These transparency rules allow the public to know the workings of
the federal government.
During the 2008 financial crisis, the Federal Reserve was unable to act quickly because the law
required advance public notice before meetings took place. This requirement kicked in when at
least three out of the five board members met. As then-Vice Chairman Donald Kohn described,
if the board wanted to discuss a matter immediately, members were required to get together in
small groups and cycle in and out so others could participate. 2 This was an inefficient and
1
Coronavirus Aid, Relief, and Economic Security Act of 2020, Pub. Law No. 116-136, 198. Sec. 4009.
https://www.congress.gov/l l 6/bills/hr748/B1LLS- l l 6hr748em.pdf
2
Maggie Severns and Victoria Guida, "Recovery law allows Fed to rope off public as it spends billions," Politico,
· · ·· · - - · - - s-1763 71
ineffective process as the Federal Reserve tried to save the economy from utter collapse.
POGO agrees that as a crisis rapidly evolves, agencies need the flexibility to be able to meet
without having to wait. Although the Federal Reserve has procedures in place to allow meetings
to take place on an expedited timeline, usually two business days, 3 one can see how this could be
too long during an unfolding crisis. Section 4009 allows the members of the Federal Reserve to
meet without public notice.
While increased flexibility may be needed for public notice requirements, another flexibility
measure in Section 4009 is not: the exemption from the requirement to keep public records of the
meeting. Section 4009 only requires votes "and the reasons for such votes" to be recorded; staff
memoranda, meeting minutes, transcripts, and recordings would no longer have to be kept.
Without those records, there will be no way for the public to know what was discussed. If an
emergency requires the Federal Reserve to meet in secret, notwithstanding the exemptions for
open meetings outlined in the Government in the Sunshine Act, 4 the public should at the very
least know why the Federal Reserve met and what they discussed.
In recent weeks, the Federal Reserve has taken unprecedented actions that are worth trillions of
dollars to stabilize the economy. 5 The Paycheck Protection Program Liquidity Facility, the
Municipal Liquidity Facility, and the Main Street Lending Program will all help support the
nation's financial institutions, small and medium sized businesses, and state and local
municipalities. 6 Given the trillions of new dollars under the Federal Reserve's purview, the
public has a vested interest in knowing why the Federal Reserve is meeting, and what they are
discussing. Although the Federal Reserve is now exempted from transparency laws, the Federal
Reserve should continue to keep records and make them accessible to the public if it meets under
"unusual and exigent circumstances."
Thank you for your consideration of this comment. Should you have any questions, please
contact Tim Stretton at (202) 347-1122 or at tstretton@pogo.org.
Sincerely,
Danielle Brian
Executive Director
3
"Government in the Sunshine Meeting Memorandum," Board of Governors of the Federal Reserve System, June
27, 2013. https://www.federalreserve.gov/aboutthefed/boardmeetings/sunshine.htm
4
5 U.S. Code§ 552b(c) (2020). https://www.law.comell.edu/uscode/text/5/552b
5
Jeff Cox, "The Fed is providing way more help for the markets now than it did during the financial crisis," CNBC,
March 24, 2020. https://www.cnbc.com/2020/03/23/fed-is-helping-the-markets-more-than-it-did-during-the
financial-crisis.html
6
Board of Governors of the Federal Reserve System, "Press Release: Federal Reserve takes additional actions to
provide up to $2.3 trillion in loans to support the economy," April 9, 2020.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200409a.htm
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