Main Street for Nonprofit Organizations Frequently Asked Questions (August 6, 2020)
Summary
A version of the frequently asked questions on the Main Street Lending Program facilities for nonprofit organizations, the Nonprofit Organization New Loan Facility (NONLF) and the Nonprofit Organization Expanded Loan Facility (NOELF), issued August 6, 2020. A notice at the top states that it was replaced with a new version on August 24, 2020 and is no longer effective. It notes that the Federal Reserve is working to operationalize the nonprofit facilities. The FAQs open with purpose and design, including how Treasury supports the program, whether loans are forgivable and how the program differs from the Primary Market Corporate Credit Facility, and go on to borrower and lender eligibility, loan terms and certifications. The document closes with tables of the financial data borrowers must report quarterly, such as the dates of covenant defaults and cures.
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Full text
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
Main Street for Nonprofit Organizations
Part of the Main Street Lending Program
Frequently Asked Questions
This document is intended to address frequently asked questions (FAQs) about the Main Street
Lending Program (Main Street or Program) facilities for nonprofit organizations, including the
Nonprofit Organization New Loan Facility (NONLF) and the Nonprofit Organization Expanded
Loan Facility (NOELF). A separate document, available here, is intended to address FAQs about
Program facilities applicable to for-profit businesses. The Federal Reserve will periodically
update these FAQs. Please check the website of the Federal Reserve Bank of Boston
(FRB Boston) for new FAQs or revisions to previously issued FAQs.
The Federal Reserve is currently working to create the infrastructure necessary to fully
operationalize the facilities for Nonprofit Organizations. Information about the operational
status of the facilities will be posted on the Board’s website when available.
CONTENTS
A. Purpose and Design ........................................................................................................ 9
A.1. Why is the Federal Reserve expanding the Program to include nonprofit organizations? .............. 9
A.2. How is the Department of the Treasury supporting the Program? .................................................. 9
A.3. Are loans that are originated or upsized in connection with the Program forgivable?.................... 9
A.4. What are the differences between the NONLF and the NOELF? ...................................................... 9
A.5. How long will the Program be in effect? ......................................................................................... 10
A.6. Is there a limit to the size of the Program? ..................................................................................... 10
A.7. What are the differences between the Program and the Payroll Protection Program and Primary
Market Corporate Credit Facility? .................................................................................................. 10
A.8. What provisions of the CARES Act apply to the Program? ............................................................. 11
A.9. What are the conflicts of interest provisions of the CARES Act? .................................................... 12
A.10. Can the principal amount of loans extended under Main Street be reduced? .............................. 12
B. NONLF Loans ................................................................................................................ 12
B.1. How does the NONLF work? ........................................................................................................... 12
B.2. What are the terms of NONLF Loans? ............................................................................................ 13
B.3. What is the effect of the requirement that NONLF Loans not be “contractually subordinated in
terms of priority” to other loans or debt instruments? ................................................................. 13
1
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
B.4. Can an Eligible Lender make an NONLF Loan to a new customer? ................................................ 14
C. [Reserved] .................................................................................................................... 14
D. NOELF Upsized Tranches ............................................................................................... 14
D.1. How does the NOELF work? ............................................................................................................ 14
D.2. What are the terms of NOELF Upsized Tranches? .......................................................................... 15
D.3. Under the NOELF, can an Eligible Lender sell a participation in an upsized tranche of a loan that
was originated as part of a multi-lender facility?........................................................................... 15
D.4. Does the Eligible Lender for the NOELF Upsized Tranche need to be the same Eligible Lender that
originated the underlying loan? ..................................................................................................... 15
D.5. If an existing multi-lender facility loan does not have an “opening” or “accordion” clause, can it
still be eligible for upsizing under the NOELF? ............................................................................... 16
D.6. What requirements exist for the loan underlying an NOELF Upsized Tranche? ............................ 16
D.7. Why is the minimum loan size for an NOELF Upsized Tranche $10 million, rather than $250,000 in
the NONLF? .................................................................................................................................... 16
D.8. Can the Eligible Lender that sells a participation to the Main Street SPV share its 5% retention of
the NOELF Upsized Tranche with other members of a multi-lender facility?................................ 17
D.9. What if no EBIDA methodology or proxy for endowment income methodology was used when
originating or amending the loan underlying an NOELF Upsized Tranche? ................................... 17
D.10. How can the “pass” criterion be satisfied if the loan underlying an upsized tranche was originated
or purchased by an Eligible Lender after December 31, 2019? ..................................................... 17
D.11. What does it mean for an NOELF Upsized Tranche to be “senior to or pari passu with, in terms of
priority and security, the Eligible Borrower’s other loans or debt instruments, other than
mortgage debt”? ............................................................................................................................ 17
D.12. Are Eligible Lenders required to hold all of their positions in the credit facility underlying an
NOELF Upsized Tranche for the life of the loan? ........................................................................... 19
E. Borrower Eligibility ....................................................................................................... 20
E.1. Which entities are eligible to borrow under the Program? ............................................................ 20
E.2. How is “Nonprofit Organization” defined? ..................................................................................... 22
E.3. How should a Nonprofit Organization count employees for purposes of determining eligibility
under the Program? ....................................................................................................................... 23
E.4. How should a Nonprofit Organization calculate 2019 revenues for purposes of determining
eligibility under the Program? ........................................................................................................ 24
E.5. Which entities are a Nonprofit Organization’s affiliates for purposes of the employee and
revenue eligibility criteria? ............................................................................................................. 24
E.6. [Reserved.] ...................................................................................................................................... 25
2
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
E.7. [Reserved.] ...................................................................................................................................... 25
E.8. What does “significant operations in the United States” mean? ................................................... 25
E.9. Can a Nonprofit Organization that is a subsidiary of a foreign company qualify as an Eligible
Borrower? ....................................................................................................................................... 25
E.10. Can an otherwise eligible Nonprofit Organization borrow if its affiliate has already borrowed
under a Main Street Facility, the MLF, or the PMCCF? .................................................................. 25
E.11. [Reserved.] ...................................................................................................................................... 26
E.12. [Reserved.] ...................................................................................................................................... 26
E.13. Are Eligible Lenders required to adopt any special compliance procedures to verify that a
Borrower is not an “Ineligible Business” under 13 CFR 120.110(o)? ............................................. 26
E.14. [Reserved.] ...................................................................................................................................... 27
E.15. How are “total expenses” and “average daily expenses” calculated for purposes of determining
Nonprofit Organization eligibility? ................................................................................................. 27
E.16. How is “non-donation revenues” calculated for purposes of determining whether a Nonprofit
Organization has total non-donation revenues equal to or greater than 60% of expenses for the
period from 2017 through 2019? ................................................................................................... 27
E.17. Can a public hospital or a public college or university that is not recognized as tax-exempt under
section 501(c)(3) of the IRC qualify as a Nonprofit Organization? ................................................. 28
E.18. Is a hospital owned by governmental entities considered an Ineligible Business? ........................ 29
E.19. How should a Nonprofit Organization calculate its non-donation revenues and expenses for the
period from 2017 through 2019 if it does not have audited financial statements or annual
receipts for fiscal year 2019 reported to the IRS?.......................................................................... 29
F. Application Process ...................................................................................................... 30
F.1. How can I apply for a Program loan? .............................................................................................. 30
F.2. Is a Nonprofit Organization eligible to borrow if it receives a PPP loan or Economic Injury Disaster
loan (EIDL)?..................................................................................................................................... 30
F.3. Do Eligible Borrowers qualify automatically for a loan under the Program? ................................. 30
F.4. Can an Eligible Borrower apply for a Main Street loan through multiple Eligible Lenders? ........... 30
G. Terms and Conditions ................................................................................................... 31
G.1. How will adjusted 2019 EBIDA be calculated? ................................................................................ 31
G.2. How will “existing outstanding and undrawn available debt” be calculated? ............................... 31
G.3. Why are Program loans based on LIBOR rather than SOFR? .......................................................... 31
G.4. When do I need to start paying interest and principal on my loan? .............................................. 31
G.5. How will principal be amortized after the second year? ................................................................ 32
3
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
G.6. Is collateral required for Main Street loans? .................................................................................. 32
G.7. Are there fees associated with Main Street loans? ........................................................................ 32
G.8. What constitutes “reasonable efforts” to maintain payroll and retain employees?...................... 33
G.9. Can an Eligible Borrower receive more than one Main Street loan?.............................................. 33
G.10. Can an Eligible Borrower receive a loan if its maximum loan size under a facility’s term sheet test
is below the minimum loan size for the same facility? .................................................................. 33
G.11. How can an Eligible Borrower determine if its existing loans had an internal risk rating equivalent
to a “pass” in the FFIEC’s supervisory rating system on December 31, 2019? .............................. 33
G.12. Can a Lender charge a Borrower additional fees above the Main Street origination fee and/or an
interest rate above LIBOR + 300 basis points? ............................................................................... 34
G.13. What methodology should be used to adjust EBIDA if an Eligible Lender has used a range of
methods in the past with respect to a single Eligible Borrower or similarly situated borrowers? 34
G.14. For purposes of adjusting EBIDA, how does an Eligible Lender identify “similarly situated
borrowers”?.................................................................................................................................... 34
G.15. Why is the Federal Reserve allowing adjustments to EBIDA for purposes of Main Street when it
has noted supervisory concerns with these adjustments in the past? Is there a limit to how
much EBIDA can be adjusted? ........................................................................................................ 35
G.16. Do PPP loans count as “outstanding debt” for purposes of Main Street?...................................... 35
G.17. How will Eligible Borrower prepayments of a Main Street loan be applied against the principal
amount due and future amortization payments? .......................................................................... 35
G.18. Can permissible fees charged at the time of origination be included in the principal amount of a
Main Street loan? ........................................................................................................................... 36
G.19. Are Eligible Lenders allowed to include a LIBOR floor in the interest rate on a Main Street Loan?
36
G.20. [Reserved.] ...................................................................................................................................... 36
G.21. Are there any prohibitions on the use of proceeds of a Main Street loan? ................................... 36
G.22. Is an Eligible Lender restricted from setting monthly or quarterly interest payments after the first
year, or will interest be required to be payable annually along with amortization payments of
principal? ........................................................................................................................................ 37
G.23. Can an Eligible Lender require an Eligible Borrower to provide collateral or guarantees solely with
respect to the Eligible Lender’s 5% retained portion of a Main Street loan? ................................ 37
G.24. Are personal guarantees required and/or permitted? ................................................................... 37
G.25. If an Eligible Borrower’s outstanding debt is maturing within 90 days, can a Main Street loan be
used to refinance such debt at the time of origination?................................................................ 37
G.26. Can an Eligible Lender or Eligible Borrower hedge interest rate and credit risk in connection with
Main Street loans?.......................................................................................................................... 37
4
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
H. Certifications and Covenants ........................................................................................ 38
H.1. Are the required certifications and covenants under the NONLF and the NOELF the same? ........ 38
H.2. What compensation, stock repurchase and capital distributions restrictions apply? .................... 38
H.3. What restrictions are placed on the Eligible Borrower’s ability to repay existing debt? ............... 38
H.4. Is an Eligible Lender permitted to accept partial repayment of an Eligible Borrower’s existing line
of credit with the Eligible Lender? ................................................................................................. 39
H.5. What restrictions are placed on an Eligible Lender’s ability to cancel or reduce any existing
committed lines of credit outstanding? ......................................................................................... 39
H.6. What is the Eligible Lender’s role in verifying certifications and covenants? ................................. 39
H.7. What debt and interest payments are considered “mandatory and due”? ................................... 39
H.8. Can an Eligible Borrower receive an NONLF Loan or an NOELF Upsized Tranche if its existing debt
arrangements require prepayment of an amount that is not de minimis upon the incurrence of
new debt? ....................................................................................................................................... 40
H.9. How must a Main Street borrower demonstrate that it is “unable to secure adequate credit
accommodations from other banking institutions”? ..................................................................... 40
H.10. How should Eligible Borrowers prepare financial records and make financial calculations in
connection with section 4.A of the Borrower Certifications and Covenants? ............................... 41
H.11. In certifying that an Eligible Borrower or Eligible Lender is not a “covered entity” under the
conflicts of interest certification, what level of reasonable diligence is required with regard to
equity interests (including non-voting preferred stock) held by financial intermediaries?........... 42
H.12. How should Eligible Borrowers calculate “total compensation” for purposes of complying with
limits on compensation under the direct loan restrictions? .......................................................... 44
H.13. What if an Eligible Borrower chooses, at the time of disbursement of the Main Street loan, to
calculate total compensation using the federal tax rules for all officers or employees that were
not Significant Deferred Compensation Recipients (as defined in question H.12), and the Eligible
Borrower later increases the amount of deferred compensation so that one or more of these
individuals become Significant Deferred Compensation Recipients? ............................................ 45
H.14. [Reserved.] ...................................................................................................................................... 46
H.15. [Reserved.] ...................................................................................................................................... 46
H.16. [Reserved.] ...................................................................................................................................... 46
H.17. [Reserved.] ...................................................................................................................................... 46
H.18. Do certifications and covenants apply to successors? .................................................................... 46
H.19. How do the compensation, capital distribution, and stock repurchase restrictions apply to an
organization in which more than one entity borrows from the Main Street Lending Program? .. 46
I. Lender Information....................................................................................................... 46
5
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
I.1. Which financial institutions are eligible to make loans under the Program? ................................. 46
I.2. How should an Eligible Lender evaluate an Eligible Borrower’s creditworthiness? ....................... 47
I.3. Can multiple affiliated Eligible Lenders participate in Main Street?............................................... 47
I.4. Will standard loan documents be provided for Main Street loans, or should Eligible Lenders use
their own loan documentation?..................................................................................................... 47
I.5. How should an Eligible Lender account for the transfer of an undivided participation interest in
the loan to the Main Street SPV? ................................................................................................... 47
I.6. Do the participation interests purchased by the Main Street SPV under the Program constitute
“true participations”? ..................................................................................................................... 48
I.7. Does the sale of participation interests to the Main Street SPV meet the criteria for a true sale
under the Bankruptcy Code?.......................................................................................................... 50
I.8. Does the Main Street SPV have the right to put back the participation interests to the Eligible
Lender? ........................................................................................................................................... 51
I.9. Do the participation interests purchased by the Main Street SPV potentially qualify for a “safe
harbor” in relation to FDIC resolution proceedings? ..................................................................... 51
I.10. Do the participation interests purchased by the Main Street SPV potentially qualify for a “safe
harbor” in relation to NCUA resolution proceedings? ................................................................... 52
I.11. Does the Servicing Agreement contemplated between the Eligible Lender and the Main Street
SPV impact whether the sale of participation interests can be considered a “true sale”? ........... 52
I.12. Will payment-in-kind (“PIK”) interest that has accrued (but has not yet been capitalized to
principal) during the period of time starting on the date when the loan agreement is funded to
the date when the loan participation purchase is funded be allocated to the Seller (i.e., the
Eligible Lender)? ............................................................................................................................. 53
I.13. Can an Eligible Lender that is a depository institution pledge its 5% of a Main Street loan to a
Federal Reserve Bank as collateral? ............................................................................................... 53
I.14. Does a lender registered with the Program for purposes of the MSNLF, MSELF, and MSPLF need
to re-register to become an Eligible Lender for purposes of the NONLF and NOELF? .................. 53
J. Loan Participation......................................................................................................... 54
J.1. What loan documentation is required to sell a participation to the Main Street SPV under the
Program? ........................................................................................................................................ 54
J.2. What loan-level information will the SPV collect for credit monitoring purposes? ....................... 54
J.3. Is there a limit to the volume of participations the Main Street SPV can purchase from a single
Eligible Lender? .............................................................................................................................. 54
J.4. Under the Loan Participation Agreement, when can the Main Street SPV sell its loan participation
or elevate its loan participation into an assignment? .................................................................... 54
J.5. What role will the Main Street SPV play in the event an Eligible Borrower enters distress? ......... 55
6
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
J.6. How will the Main Street SPV approach decision-making with respect to its voting rights under
the Loan Participation Agreement or Co-Lender Agreement? ...................................................... 55
J.7. Will the Main Street SPV assert special administrative priority under Section 507(a)(2) of the
Bankruptcy Code for its claims against an Eligible Borrower in bankruptcy proceedings? ........... 56
K. Regulatory Treatment................................................................................................... 57
K.1. What is the regulatory capital treatment for the interest in a Main Street loan retained by an
Eligible Lender? .............................................................................................................................. 57
K.2. How will Program loans be treated for supervised firms subject to stress testing? ...................... 57
K.3. Are Main Street loans for existing customers considered new accounts for FinCEN Rule CDD
purposes? Are lenders required to collect, certify, or verify beneficial ownership information in
accordance with the rule requirements for existing customers? .................................................. 58
K.4. How will federal supervisors treat loans extended through the Main Street program?................ 58
K.5. For an Eligible Lender that is a national bank or savings association, do lending limits apply to the
entire size of a Main Street loan, or only the percentage of a loan that is retained by the Eligible
Lender? ........................................................................................................................................... 59
K.6. For Eligible Lenders that are federally insured credit unions, does the member business loan limit
apply to the entire size of a Main Street loan, or only the percentage of a loan that is retained by
the Eligible Lender? ........................................................................................................................ 60
K.7. For Eligible Lenders that are federally insured credit unions, does the limit on commercial loans
to one member apply to the entire size of a Main Street loan, or only the percentage of a loan
that is retained by the Eligible Lender? .......................................................................................... 60
L. Operational Details ....................................................................................................... 61
L.1. How will the Federal Reserve administer the Program? ................................................................ 61
L.2. What information will the Federal Reserve disclose regarding the Main Street facilities?............ 61
L.3. How will the remaining capacity of the Program be communicated?............................................ 62
L.4. Are Eligible Lenders required to commit and pre-fund loans under the Program before the SPV
has committed to purchase its participation in a Program Loan? ................................................. 62
L.5. [Reserved.] ...................................................................................................................................... 63
L.6. [Reserved.] ...................................................................................................................................... 63
L.7. What conditions will the Main Street SPV place on purchasing participations in Program loans? 63
L.8. What financial information is an Eligible Borrower required to submit to an Eligible Lender at the
time of origination of a Main Street loan? What Eligible Borrower financial information is an
Eligible Lender required to submit to the Main Street Portal with other loan participation
documentation? ............................................................................................................................. 63
7
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
L.9. What information is an Eligible Lender required to submit to the Main Street Portal in connection
with the submission of the documentation required to sell a loan participation to the Main
Street SPV? ..................................................................................................................................... 65
L.10. What type of Lender Portal security is in place, such that lenders and borrowers can be assured
that their data will be maintained securely?.................................................................................. 67
L.11. If an Eligible Lender uses the Condition of Funding Model in Question L.4, how should loan
documents be prepared to reflect the required maturity period, interest rate, deferral and
accrual, principal amortization, and loan number? ....................................................................... 68
L.12. Can a single Main Street loan be made to multiple co-borrowers? ............................................... 69
M. Other Information ........................................................................................................ 69
M.1. Where should questions regarding the Program be directed?....................................................... 69
M.2. How can I receive updates regarding changes to the Program? .................................................... 69
M.3. Will the Federal Reserve provide further guidance on how to apply the terms of the Program to
individual borrowers?..................................................................................................................... 69
M.4. [Reserved.] ...................................................................................................................................... 70
M.5. [Reserved.] ...................................................................................................................................... 70
Appendix A: Loan Document Checklist ................................................................................ 71
Appendix B: Required Covenants in Loan Documentation ................................................... 74
I. Priority and Security Covenant ....................................................................................................... 74
II. Borrower Certifications and Covenants Material Breach Mandatory Prepayment Provision ........ 76
III. Cross-Acceleration Provision........................................................................................................... 77
IV. Financial Reporting Covenant ......................................................................................................... 78
Appendix C: Required Financial Reporting........................................................................... 80
8
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
A. Purpose and Design
A.1. Why is the Federal Reserve expanding the Program to include nonprofit
organizations?
The spread of COVID-19 has harmed communities and substantially disrupted many sectors of
the economy, including the nonprofit sector. In many cases, the disruptions have heightened
the demand for nonprofit organization services and the need for such organizations to obtain
financing. Nonprofit organizations are critical parts of the economy, employing millions of
people, providing essential services to communities, and supporting innovation and the
development of a highly skilled workforce.
The Main Street Lending Program Nonprofit Organization New Loan Facility (NONLF) and
Nonprofit Organization Expanded Loan Facility (NOELF) are designed to provide support to
small and medium-sized nonprofit organizations and their employees across the United States
during the current period of financial strain by supporting the provision of credit to such
organizations. The availability of additional credit is intended to help nonprofit organizations
that were in sound financial condition prior to the onset of the COVID-19 pandemic maintain
their operations and payroll until conditions normalize.
A.2. How is the Department of the Treasury supporting the Program?
The Department of the Treasury (Treasury Department) will make a $75 billion equity
investment in a Special Purpose Vehicle (Main Street SPV) in connection with the Main Street
Lending Program, which includes the nonprofit facilities. The funds invested by the Treasury
Department were appropriated to the Exchange Stabilization Fund under section 4027 of the
Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
A.3. Are loans that are originated or upsized in connection with the Program
forgivable?
No. Main Street loans are full-recourse loans and are not forgivable. Under section 4003(d)(3)
of the CARES Act, the principal amount of a Main Street loan cannot be reduced through loan
forgiveness.
A.4. What are the differences between the NONLF and the NOELF?
Main Street includes two facilities designed for nonprofit organizations, each of which was
authorized by the Board of Governors of the Federal Reserve System (Board) under section
13(3) of the Federal Reserve Act. Both facilities use the same Eligible Lender and Eligible
Borrower criteria, and have many of the same features, including the same maturity, interest
rate, deferral of principal for two years, deferral of interest for one year, and ability of the
borrower to prepay without penalty.
9
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
Other features of the loans extended in connection with each facility differ, including with
respect to the loan size and its relationship to existing debt.
• NONLF: Eligible Lenders extend new five-year term loans to Eligible Borrowers ranging
in size from $250,000 to $35 million. The maximum size of a loan made in connection
with the NONLF cannot exceed the Eligible Borrower’s average 2019 quarterly revenue.
The loans must not be, at the time of origination or at any time during the term of the
Eligible Loan, contractually subordinated in terms of priority to any of the Eligible
Borrower’s other loans or debt instruments. The unique features of loans originated in
connection with the NONLF (NONLF Loans) are provided in the NONLF term sheet.
• NOELF: Eligible Lenders increase (or “upsize”) an Eligible Borrower’s existing term loan
or revolving credit facility. The upsized tranche is a five-year term loan ranging in size
from $10 million to $300 million. The maximum size of a loan made in connection with
the NOELF cannot exceed the Eligible Borrower’s average 2019 quarterly revenue. At
the time of upsizing and at all times thereafter, the upsized tranche must be senior to or
pari passu with, in terms of priority and security, the Eligible Borrower’s other loans or
debt instruments, other than mortgage debt. The features associated with tranches of
loans that are upsized in connection with the NOELF (NOELF Upsized Tranches) are
outlined in the NOELF term sheet.
A.5. How long will the Program be in effect?
The Program was established to respond to uncertainty related to the COVID-19 pandemic and
is authorized to purchase participations in NONLF Loans and NOELF Upsized Tranches until
December 31, 2020. The Main Street SPV will cease purchasing loan participations on
December 31, 2020, unless the Program is extended by the Board and the Treasury
Department. The FRB Boston will continue to operate the SPV after such date until the Main
Street SPV’s assets mature or are sold.
A.6. Is there a limit to the size of the Program?
The Main Street SPV will purchase up to $600 billion of participations in eligible loans across all
Main Street Program facilities. The Federal Reserve and the Treasury Department have
assessed this amount to be appropriate in light of the current financial strains facing Eligible
Borrowers. The Federal Reserve and the Treasury Department will continue to assess the
situation and needs of Eligible Borrowers and may adjust the Program’s size in the future.
A.7. What are the differences between the Program and the Payroll Protection
Program and Primary Market Corporate Credit Facility?
Similar to the Payroll Protection Program (PPP) and the Primary Market Corporate Credit
Facility (PMCCF), Main Street was created to assist companies that have been adversely
10
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
affected by the COVID-19 pandemic. Each of these programs, however, was developed to
provide liquidity to companies of different sizes:
• PPP: The PPP was established by the CARES Act and implemented by the Small Business
Administration (SBA) to support the payroll and operations of small businesses
(including small nonprofit organizations) through the issuance of government-
guaranteed loans that include a forgiveness feature for borrowers that satisfy the
requirements of the PPP.
• Main Street: The Federal Reserve designed Main Street to support small and medium-
sized for-profit businesses and nonprofit organizations that were unable to access the
PPP or that require additional financial support after receiving a PPP loan. Main Street
loans are not forgivable.
• PMCCF: The Federal Reserve established the PMCCF to support large companies
through the purchase of eligible corporate bonds from, and lending through syndicated
loans to, large companies. PMCCF loans are not forgivable.
A.8. What provisions of the CARES Act apply to the Program?
Under section 4003(b)(4) of the CARES Act, the Secretary of the Treasury (Secretary) is
authorized to make loans and loan guarantees to, and other investments in, programs or
facilities established by the Board for the purpose of providing liquidity to the financial system
that supports lending to eligible businesses (including, for these purposes, eligible nonprofits),
states, or municipalities. The Secretary has committed $75 billion of the funds appropriated
under Title IV of the CARES Act in the Main Street SPV in support of the Program. The following
restrictions of the CARES Act have been incorporated into the design of the Program:
• Eligible Business Definition: Section 4002(4) of the CARES Act prevents a business from
participating in the Program if it has “otherwise received adequate economic relief in
the form of loans or loan guarantees provided under [the Coronavirus Economic
Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act)].” Consistent with this
restriction, businesses that are receiving “specific support” pursuant to section
4003(b)(1)-(3) are not eligible for the Program.
• Direct Loans: Eligible Borrowers must commit to comply with the restrictions that apply
to direct loan programs under section 4003(c)(3)(A)(ii) of the CARES Act.
• U.S. Business Requirement: Under section 4003(c)(3)(C) of the CARES Act, Eligible
Borrowers must be “businesses that are created or organized in the United States or
under the laws of the United States and that have significant operations in and a
majority of its employees based in the United States.”
11
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
• Loan Forgiveness Prohibition: Under section 4003(d)(3), the principal amount of the
portion of any NONLF Loan, or NOELF Upsized Tranche that is participated to the Main
Street SPV cannot be reduced through loan forgiveness. See question A.10 for more
information about this requirement.
• Conflicts of Interest: Under section 4019 of the CARES Act, Eligible Lenders and Eligible
Borrowers will be required to certify that no “Covered Individual” owns, controls, or
holds 20% or more (by vote or value) of any class of equity ownership interest in the
business. 1 “Covered Individuals” include the President, the Vice President, the head of
any Executive Department, any Member of Congress, and certain immediate family
members of the foregoing.
A.9. What are the conflicts of interest provisions of the CARES Act?
Section 4019 of the CARES Act prohibits entities in which certain government officials (list here)
and some of their immediate family members have a “controlling interest” from participating in
certain government programs, including Main Street. Each participating entity, both Eligible
Lenders and Eligible Borrowers, will be required to certify that the entity is not a “covered
entity” as defined in section 4019 of the CARES Act. Detailed instructions are provided in the
Lender Registration Certifications and Covenants and the NONLF and NOELF Borrower
Certifications and Covenants.
A.10. Can the principal amount of loans extended under Main Street be reduced?
Main Street is not a grant program and is subject to the prohibition on loan forgiveness in
section 4003(d)(3) of the CARES Act. In the event of restructurings or workouts, the Main
Street SPV may agree to reductions in interest (including capitalized interest), extended
amortization schedules and maturities, and higher priority “priming” loans.
B. NONLF Loans
B.1. How does the NONLF work?
Eligible Lenders may extend a new NONLF Loan to an Eligible Borrower and sell a 95%
participation in that NONLF Loan to the Main Street SPV at par value. All such sales will be
structured as “true sales” and must be completed expeditiously after the origination of the
NONLF Loan. The Eligible Lender must retain 5% of the NONLF Loan until (i) it matures or
(ii) neither the Main Street SPV nor a Governmental Assignee holds an interest in NONLF Loan
1
For purposes of the NONLF and NOELF, an Eligible Borrower alternatively would be permitted to certify that the
Eligible Borrower does not have and cannot issue equity interests, such that Section 4019(c) of the CARES Act is
inapplicable.
12
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
in any capacity, whichever comes first. The Main Street SPV and the Eligible Lender would
share in any losses on the NONLF Loan on a pari passu basis.
The Eligible Borrower must have been in sound financial condition prior to the onset of the
COVID-19 pandemic. In order for an Eligible Borrower to receive an NONLF Loan, any existing
loan it had outstanding with the Eligible Lender as of December 31, 2019, must have had an
internal risk rating (based on the Eligible Lender’s risk rating system) that was equivalent to a
“pass” in the Federal Financial Institutions Examination Council’s (FFIEC) supervisory rating
system as of that date.
B.2. What are the terms of NONLF Loans?
The NONLF term sheet is available on the Board’s Main Street page. More information will be
made available on that page regarding loan participation terms, credit administration, and loan
servicing.
B.3. What is the effect of the requirement that NONLF Loans not be
“contractually subordinated in terms of priority” to other loans or debt
instruments?
An NONLF Loan, at the time of origination or at any time during its term, may not be
contractually subordinated in terms of priority to the Eligible Borrower’s other loans or debt
instruments. This means that an NONLF Loan may not be junior in priority in bankruptcy to the
Eligible Borrower’s other unsecured loans or debt instruments.2 This provision does not
prevent:
• the issuance of an NONLF Loan that is a secured loan (including in a second lien or other
capacity) to an Eligible Borrower, whether or not the Eligible Borrower has an
outstanding secured loan of any lien position or maturity;
• the issuance of an NONLF Loan that is an unsecured loan to an Eligible Borrower,
regardless of the term or secured or unsecured status of the Eligible Borrower’s existing
indebtedness; or
• the Eligible Borrower from taking on new secured or unsecured debt after receiving an
NONLF Loan, provided the new debt would not have higher contractual priority in
bankruptcy than the NONLF Loan.
2
For the avoidance of doubt, prohibitions on contractual subordination with respect to Main Street loans do not
prevent the incurrence of obligations that have mandatory priority under the Bankruptcy Code or other insolvency
laws that apply to entities generally.
13
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
B.4. Can an Eligible Lender make an NONLF Loan to a new customer?
Yes. Eligible Lenders should follow their normal policies and procedures for originating a loan
to a new customer, including Know Your Customer procedures. In addition, when determining
borrower eligibility, the Eligible Lender must require the Eligible Borrower to use an adjusted
EBIDA methodology that is based on a methodology that the Eligible Lender has previously
required to be used to adjust EBIDA when extending credit to similarly situated borrowers on or
before June 15, 2020. The Eligible Lender should calculate operating revenue as unrestricted
operating revenue, excluding funds committed to be spent on capital, and including a proxy for
endowment income in place of unrestricted investment gains or losses. The methodology used
by the Eligible Lender to calculate the proxy for endowment income must be the methodology
it has used for similarly situated borrowers on or before June 15, 2020.
C. [Reserved]
D. NOELF Upsized Tranches
D.1. How does the NOELF work?
Eligible Lenders that have extended an existing term loan or revolving credit facility to an
Eligible Borrower may increase (or “upsize”) that extension of credit, by adding a new
increment (or “tranche”). Eligible Lenders may sell a 95% participation in the NOELF Upsized
Tranche to the Main Street SPV at par value. All such sales will be structured as “true sales”
and must be completed expeditiously after the upsizing. The Eligible Lender must retain 5% of
the NOELF Upsized Tranche until (i) it matures or (ii) neither the Main Street SPV nor a
Governmental Assignee holds an interest in the NOELF Upsized Tranche in any capacity,
whichever comes first. The Eligible Lender must also retain its interest in the underlying loan
until (i) that loan matures, (ii) the NOELF Upsized Tranche matures, or (iii) neither the Main
Street SPV nor a Governmental Assignee holds an interest in the NOELF Upsized Tranche in any
capacity, whichever comes first. The Main Street SPV and the Eligible Lender would share in
any losses on the NOELF Upsized Tranche on a pari passu basis. Any collateral that secures the
underlying loan must secure the upsized tranche on a pari passu basis.
To be eligible for “upsizing,” the existing term loan or revolving credit facility must have been
originated on or before June 15, 2020, and must have a remaining maturity of at least
18 months. The Eligible Lender may extend the maturity of an existing loan or revolving credit
facility at the time of upsizing in order for the underlying instrument to satisfy the 18-month
remaining maturity requirement.
The Eligible Borrower must have been in sound financial condition prior to the onset of the
COVID-19 pandemic. The existing loan or revolving credit facility must have had a risk rating,
14
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
based on the Eligible Lender’s internal rating system, equivalent to a “pass” in the FFIEC’s
supervisory rating system as of December 31, 2019.
D.2. What are the terms of NOELF Upsized Tranches?
The NOELF term sheet is available on the Board’s Main Street page. More information will be
made available on that page regarding loan participation terms, credit administration, and loan
servicing.
D.3. Under the NOELF, can an Eligible Lender sell a participation in an upsized
tranche of a loan that was originated as part of a multi-lender facility?
If the loan underlying an NOELF Upsized Tranche is part of a multi-lender facility, the Eligible
Lender must be one of the lenders that holds an interest in the underlying loan at the date of
upsizing. Only the Eligible Lender for the NOELF Upsized Tranche is required to meet the
Eligible Lender criteria. Other members of the multi-lender facility are not required to be
Eligible Lenders.
More than one lender under an existing multi-lender facility may choose to “upsize” the
existing facility to originate an NOELF Upsized Tranche. Such NOELF Upsized Tranches should
be separately submitted to the SPV for the sale of a participation interest. However, the
Eligible Borrower’s aggregate borrowing is constrained by the NOELF maximum loan size test
and, therefore, the Eligible Borrower’s aggregate borrowing cannot exceed $300 million or its
average 2019 quarterly revenue.
D.4. Does the Eligible Lender for the NOELF Upsized Tranche need to be the same
Eligible Lender that originated the underlying loan?
No. The Eligible Lender is not required to have been the Eligible Lender that originally extended
the loan underlying an NOELF Upsized Tranche. If the Eligible Lender purchased the interest in
the underlying loan as of December 31, 2019, the Eligible Lender must have assigned an
internal risk rating to the underlying loan equivalent to a “pass” in the FFIEC’s supervisory rating
system as of that date. If the Eligible Lender purchased the interest after December 31, 2019,
the Eligible Lender should use the internal risk rating given to that loan at the time of purchase
to determine whether the loan is eligible for upsizing under the NOELF.
The position that an Eligible Lender relies upon to upsize a loan in connection with the NOELF
may have been purchased from an Eligible Lender or a non-eligible lender.
15
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
D.5. If an existing multi-lender facility loan does not have an “opening” or
“accordion” clause, can it still be eligible for upsizing under the NOELF?
Yes. The Eligible Borrower, Eligible Lender(s), and any other required parties must amend the
underlying credit agreements as needed to comply with the requirements set out in the NOELF
term sheet.
D.6. What requirements exist for the loan underlying an NOELF Upsized Tranche?
The loan underlying an NOELF Upsized Tranche can be a secured or unsecured term loan or
revolving credit facility that:
• was made by an Eligible Lender(s) to an Eligible Borrower;
• is currently held, at least in part, by an Eligible Lender;
• was originated on or before June 15, 2020;
• has a remaining maturity of at least 18 months (taking into account any adjustments
made to the maturity of the loan after June 15, 2020, including at the time of upsizing);
and
• received an internal risk rating equivalent to a “pass” in the FFIEC’s supervisory rating
system by the Eligible Lender, as of December 31, 2019, or otherwise satisfies the
criteria set out in question D.10.
Any collateral securing the Eligible Loan (at the time of upsizing or on any subsequent date)
must secure the NOELF Upsized Tranche on a pari passu basis.
D.7. Why is the minimum loan size for an NOELF Upsized Tranche $10 million,
rather than $250,000 in the NONLF?
The NOELF was designed to meet the needs of borrowers with existing loan arrangements,
particularly those with larger and more complex existing loans, where pre-existing loan
documentation can be used. As a result, the minimum loan size for an NOELF Upsized Tranche
is $10 million.
The Federal Reserve will continue to evaluate whether the loan amounts allowed under the
Program should be adjusted to enhance the Program’s efficacy. Any such adjustments would
be communicated well in advance of their effective date to ensure that Eligible Lenders and
Eligible Borrowers are not adversely affected.
16
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
D.8. Can the Eligible Lender that sells a participation to the Main Street SPV share
its 5% retention of the NOELF Upsized Tranche with other members of a
multi-lender facility?
No. The Eligible Lender must retain 5% of the NOELF Upsized Tranche, even when the
underlying loan is part of a multi-lender facility. The Eligible Lender must retain 5% of the
NOELF Upsized Tranche until (A) the NOELF Upsized Tranche matures or (B) neither the Main
Street SPV nor a Governmental Assignee holds an interest in the loan in any capacity, whichever
occurs first.
D.9. What if no EBIDA methodology or proxy for endowment income
methodology was used when originating or amending the loan underlying an
NOELF Upsized Tranche?
If the Eligible Borrower’s EBIDA or proxy for endowment income were not calculated or
included in the loan documentation or internal risk analysis when originating the loan or
revolving credit facility that would underlie an NOELF Upsized Tranche, the Eligible Lender must
require the Eligible Borrower to calculate its adjusted EBIDA or a proxy for endowment income
using a methodology that the Eligible Lender has required to be used in other contexts for the
Eligible Borrower or, if there is no such calculation, for similarly situated borrowers. See
questions G.13 and G.14 for more information.
D.10. How can the “pass” criterion be satisfied if the loan underlying an upsized
tranche was originated or purchased by an Eligible Lender after December
31, 2019?
If an existing loan was originated or purchased by an Eligible Lender after December 31, 2019,
the Eligible Lender should use the internal risk rating given to that loan at origination or
purchase (as applicable) to determine whether the loan satisfies the “pass” criterion for
upsizing under the NOELF.
D.11. What does it mean for an NOELF Upsized Tranche to be “senior to or pari
passu with, in terms of priority and security, the Eligible Borrower’s other
loans or debt instruments, other than mortgage debt”?
NOELF Upsized Tranches must be senior to or pari passu with, in terms of priority and security,
the Eligible Borrower’s other Loans or Debt Instruments, other than Mortgage Debt (the NOELF
Priority and Security Requirement). The NOELF Priority and Security Requirement is designed
to prevent NOELF Upsized Tranches from being subordinated or otherwise disadvantaged in
terms of priority or security in relation to the other Loans or Debt Instruments of the Eligible
Borrower, except for Mortgage Debt.
17
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
For purposes of the NOELF Priority and Security Requirement:
• “Loans or Debt Instruments” means debt for borrowed money and all obligations
evidenced by bonds, debentures, notes, loan agreements or other similar instruments,
and all guarantees of the foregoing.
• “Mortgage Debt” means (i) debt secured only by real property at the time of the NOELF
Upsized Tranche’s origination; and (ii) limited recourse equipment financings (including
equipment capital or finance leasing and purchase money equipment loans) secured
only by the acquired equipment.
Time of Origination: To comply with the NOELF Priority and Security Requirement at the time
of origination, Eligible Lenders and Eligible Borrowers must apply the following guidance:
• Secured Loans: The NOELF Upsized Tranche must be secured if, at the time of
origination, the Eligible Borrower has any other secured Loans or Debt Instruments,
other than Mortgage Debt. The NOELF Upsized Tranche must be secured by the
collateral (including, if applicable, any Mortgage Debt) securing any other tranche of the
underlying credit facility on a pari passu basis. Eligible Lenders and Eligible Borrowers
may add new collateral to secure the loan (including the NOELF Upsized Tranche on a
pari passu basis) at the time of upsizing. If the underlying credit facility includes both
term loan tranche(s) and revolver tranche(s), the NOELF Upsized Tranche needs to share
collateral on a pari passu basis with the term loan tranche(s) only. Secured NOELF
Upsized Tranches must not be contractually subordinated in terms of priority to any of
the Eligible Borrower’s other Loans or Debt Instruments.
• Unsecured Loans: The NOELF Upsized Tranche can be unsecured only if the Eligible
Borrower does not have, as of the date of origination, any secured Loans or Debt
Instruments (other than Mortgage Debt that does not secure any other tranche of the
underlying credit facility). Unsecured NOELF Upsized Tranches must not be
contractually subordinated in terms of priority to the Eligible Borrower’s other
unsecured Loans or Debt Instruments. See question B.3 for more information on
contractual subordination.
Life of the Loan: In order to comply with the NOELF Priority and Security Requirement during
the term of the NOELF Upsized Tranche after the date of origination, the loan documentation
for the NOELF Upsized Tranche must:
• ensure that the NOELF Upsized Tranche does not become contractually subordinated in
terms of priority to any of the Eligible Borrower’s other Loans or Debt Instruments;
• ensure that the NOELF Upsized Tranche remains secured on a pari passu basis by the
collateral securing the underlying credit facility, as described in the “time of
origination” section above; and
18
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
• contain a lien covenant or negative pledge that is of the type – and contains exceptions,
limitations, carve-outs, baskets, materiality thresholds, and qualifiers – that are
consistent with those used by the Eligible Lender in its ordinary course lending to
similarly situated borrowers.
o Appendix B contains a model lien covenant that Eligible Lenders should
reference when drafting NOELF loan documentation.
o With respect to an underlying credit facility that has more than one lender, any
lien covenant that was negotiated in good faith prior to June 15, 2020, as part of
any underlying NOELF Loan, is sufficient to satisfy this requirement.
See question G.14 for more information on identifying similarly situated borrowers. See the
NOELF Borrower Certifications and Covenants and NOELF Lender Transaction Specific
Certifications and Covenants for more information about the responsibilities that Borrowers
and Lenders have in relation to the NOELF Priority and Security Requirement.
D.12. Are Eligible Lenders required to hold all of their positions in the credit facility
underlying an NOELF Upsized Tranche for the life of the loan?
After originating an NOELF Upsized Tranche, the Eligible Lender must retain its interest in the
credit facility underlying an NOELF Upsized Tranche until (i) the underlying credit facility
matures, (ii) the NOELF Upsized Tranche matures, or (iii) neither the Main Street SPV nor a
Governmental Assignee holds an interest in the NOELF Upsized Tranche in any capacity,
whichever comes first. 3 This requirement is intended to apply to position(s) that an Eligible
Lender holds in the underlying credit facility for investment purposes, and is not generally
intended to extend to the purchase or sale of short-term positions by an Eligible Lender’s
trading desk with unaffiliated parties for market-making purposes. In order to be treated as a
market-making position under this exemption, the following conditions must be met:
(i) the position cannot be the position the Eligible Lender relied upon in order to upsize the
loan (i.e., it cannot be an Eligible Lender’s only position in the underlying credit facility);
(ii) the position must be purchased or sold by a trading desk in a transaction with an
unaffiliated party, and must be segregated from the position the lender relied upon to
upsize the loan; and
(iii) the position must be held in an available-for-sale capacity in anticipation of reasonably
expected near term demand.
3
For the avoidance of doubt, the Eligible Lender may sell down part of its interest in the underlying credit facility
before originating the NOELF Upsized Tranche.
19
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
If an Eligible Lender comes into possession of additional positions in the underlying credit
facility after the upsizing of such facility in connection with the NOELF, it is not required to
retain such new positions.
E. Borrower Eligibility
E.1. Which entities are eligible to borrow under the Program?
To be eligible to borrow under the Program, a nonprofit organization must satisfy certain
eligibility criteria, as set out in the NONLF and NOELF term sheets and described further below.
The Eligible Borrower criteria are the same across both facilities.
(1) The Nonprofit Organization must have been in continuous operation since January 1,
2015. A Nonprofit Organization has been in “continuous operation” if that
organization, or a predecessor organization, was established on or before January 1,
2015, and has been engaged in activities in furtherance of its tax-exempt purpose
since that date. 4 In addition, the Nonprofit Organization must have been formed
under the laws of the United States, one of the several states, the District of Columbia,
any of the territories and possessions of the United States, or an Indian Tribal
government.
(2) The Nonprofit Organization must not be an Ineligible Business. Ineligible Businesses
include Businesses listed in 13 CFR 120.110(b)-(j), (m)-(s), as modified and clarified by
SBA regulations for purposes of the PPP on or before April 24, 2020. Such
modifications and clarifications include the SBA’s recent interim final rules available at
85 Fed. Reg. 20811, 85 Fed. Reg. 21747, and 85 Fed. Reg. 23450 (released by the SBA
on April 24, 2020). In addition, the Federal Reserve has incorporated the SBA’s
Interim Final Rules published in the Federal Register on June 18, 2020 (85 Fed. Reg.
36717) and June 26, 2020 (85 Fed. Reg. 38301), which amended the SBA’s earlier
Interim Final Rule published in the Federal Register on April 15, 2020 (85 Fed. Reg.
20811). The Federal Reserve may further modify the application of these restrictions
to Main Street.
(3) The Nonprofit Organization must meet at least one of the following two conditions:
(a) the Nonprofit Organization has 15,000 employees or fewer, or (b) the Nonprofit
Organization has 2019 annual revenues of $5 billion or less. To determine how many
employees a Nonprofit Organization has or a Nonprofit Organization’s 2019 revenues,
the employees and revenues of the Nonprofit Organization must be aggregated with
the employees and revenues of its affiliated entities.
4
Entities that are currently tax-exempt but were previously for-profit businesses that engaged in the same
activities during both periods may include that full history when assessing years of continuous operation.
20
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
(4) The Nonprofit Organization must have at least 10 employees. Nonprofit
Organizations must have at least 10 employees at the time of origination of the
NONLF Loan or NOELF Upsized Tranche. The requirement that the Nonprofit
Organization has at least 10 employees applies to the Nonprofit Organization with its
affiliated entities. See E.3 for definition of employee.
(5) The Nonprofit Organization must have an endowment of less than $3 billion. The
size of the endowment should be calculated as of the date of origination of the NONLF
Loan or NOELF Upsized Tranche.
(6) The Nonprofit Organization must have total non-donation revenues equal to or
greater than 60% of expenses for the period from 2017 through 2019. Non-donation
revenues equal gross revenues minus donations. Donations include proceeds from
fundraising events, federated campaigns, gifts, donor-advised funds, and funds from
similar sources, but exclude (i) government grants, (ii) revenues from a supporting
organization, (iii) grants from private foundations that are disbursed over the course
of more than one calendar year, and (iv) any contributions of property other than
money, stocks, bonds, and other securities (noncash contributions), provided that
such noncash contribution is not sold by the organization in a transaction unrelated to
the organization’s tax-exempt purpose. Expenses equal total expenses minus
depreciation, depletion, and amortization. See question E.16 for more detail on this
calculation.
(7) The Nonprofit Organization must have a ratio of adjusted 2019 earnings before
interest, depreciation and amortization (EBIDA) to unrestricted 2019 operating
revenue, greater than or equal to 2%. The methodology used by the Eligible Lender
to calculate adjusted 2019 EBIDA must be the methodology it has previously used for
adjusting EBIDA when extending credit to the Eligible Borrower or similarly situated
borrowers on or before June 15, 2020 (with respect to the NONLF), or when
originating or amending the underlying loan on or before June 15, 2020 (with respect
to the NOELF). The Eligible Lender should calculate “operating revenue” as
unrestricted operating revenue, excluding funds committed to be spent on capital,
and including a proxy for endowment income in place of unrestricted investment gains
or losses. The methodology used by the Eligible Lender to calculate the proxy for
endowment income must be the methodology it has used for the Eligible Borrower or
similarly situated borrowers on or before June 15, 2020.
(8) The Nonprofit Organization must have a ratio (expressed as a number of days) of (i)
liquid assets at the time of origination of the loan or Upsized Tranche to (ii) average
daily expenses over the previous year, equal to or greater than 60 days. “Liquid
assets” is defined as unrestricted cash and investments that can be accessed and
21
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
monetized within 30 days. An organization may include in “liquid assets” the amount
of cash receipts it reasonably estimates to receive within 60 days related to the
provision of services, facilities, or products, or any other program service that exceed
its reasonably estimated cash outflows payable within the same 60-day period.
(9) The Nonprofit Organization at the time of origination of the loan or Upsized Tranche
must have a ratio of (i) unrestricted cash and investments to (ii) existing outstanding
and undrawn available debt, plus the amount of any loan under the Facility, plus the
amount of any CMS Accelerated and Advance Payments, that is greater than 55%.
(10) The Nonprofit Organization must be organized under the laws of the United States.
Under section 4003(c)(3)(C) of the CARES Act, Eligible Borrowers must be Businesses
that were created or organized in the United States or under the laws of the United
States with significant operations in and a majority of their employees based in the
United States.
(11) The Nonprofit Organization may only participate in one of the Main Street facilities
(NONLF, NOELF, MSNLF, MSPLF, MSELF) and must not also participate in the PMCCF
or the Municipal Liquidity Facility (MLF).
(12) The Nonprofit Organization must not have received specific support pursuant to the
Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES
Act). A Nonprofit Organization is not eligible if it has received support pursuant to
section 4003(b)(1)-(3) of the CARES Act.
(13) The Nonprofit Organization must be able to make all of the certifications and
covenants required under the Program. See the NONLF and NOELF Borrower
Certifications and Covenants for more information.
Borrowers that satisfy all criteria above may apply to an Eligible Lender for a Main Street loan.
The Eligible Lender is expected to conduct an assessment of each potential borrower’s financial
condition to determine whether the loan is approved.
For the avoidance of doubt, a Nonprofit Organization that has received PPP loans, or that has
affiliates that have received PPP loans, is permitted to borrow under Main Street, provided that
the Nonprofit Organization is an Eligible Borrower. Borrowers that are not eligible for a Main
Street loan should consult the Treasury Department and SBA to determine if they are eligible
for other relief programs.
E.2. How is “Nonprofit Organization” defined?
A Nonprofit Organization is a tax-exempt nonprofit organization described in section 501(c)(3)
of the Internal Revenue Code (“IRC”) or a tax-exempt veterans’ organization described in
section 501(c)(19) of the IRC.
22
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FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
• Section 501(c)(3): Corporations, and any community chest, fund, or foundation,
organized and operated exclusively for religious, charitable, scientific, testing for public
safety, literary, or educational purposes, or to foster national or international amateur
sports competition (but only if no part of its activities involve the provision of athletic
facilities or equipment), or for the prevention of cruelty to children or animals, no part
of the net earnings of which inures to the benefit of any private shareholder or
individual, no substantial part of the activities of which is carrying on propaganda, or
otherwise attempting, to influence legislation (except as otherwise provided in
subsection (h)), and which does not participate in, or intervene in (including the
publishing or distributing of statements), any political campaign on behalf of (or in
opposition to) any candidate for public office.
• Section 501(c)(19): A post or organization of past or present members of the Armed
Forces of the United States, or an auxiliary unit or society of, or a trust or foundation for,
any such post or organization—
A. organized in the United States or any of its possessions,
B. at least 75 percent of the members of which are past or present members of
the Armed Forces of the United States and substantially all of the other
members of which are individuals who are cadets or are spouses, widows,
widowers, ancestors, or lineal descendants of past or present members of the
Armed Forces of the United States or of cadets, and
C. no part of the net earnings of which inures to the benefit of any private
shareholder or individual.
Other forms of organization may be considered for inclusion as an Eligible Borrower under the
Program at the discretion of the Federal Reserve.
E.3. How should a Nonprofit Organization count employees for purposes of
determining eligibility under the Program?
To be an Eligible Borrower, a Nonprofit Organization must meet at least one of the following
two conditions: (a) the Nonprofit Organization has 15,000 employees or fewer, or (b) the
Nonprofit Organization has 2019 annual revenues of $5 billion or less. In addition, a Nonprofit
Organization must have at least 10 employees. To determine how many employees a Nonprofit
Organization has, it should follow the framework set out in the SBA’s regulation at 13 CFR
121.106. As set out in 13 CFR 121.106, the Nonprofit Organizations should count as employees
all full-time, part-time, seasonal, or otherwise employed persons, excluding volunteers and
independent contractors. A Nonprofit Organization that is an institution of higher education
must exclude student workers participating in a Federal Work Study Program, on the same
basis as, and subject to the same conditions and requirements of, the SBA’s regulations at 85
23
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August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
Fed. Reg. 27287-90 (May 8, 2020). Nonprofit Organizations should count their own employees
and those employed by their affiliates. In order to determine the applicable number of
employees, Nonprofit Organizations should use the average of the total number of persons
employed by the Eligible Borrower and its affiliates for each pay period over the 12 months
prior to the origination or upsizing of the Main Street loan.
E.4. How should a Nonprofit Organization calculate 2019 revenues for purposes
of determining eligibility under the Program?
To be an Eligible Borrower, a Nonprofit Organization must meet at least one of the following
two conditions: (a) the Nonprofit Organization has 15,000 employees or fewer, or (b) the
Nonprofit Organization has 2019 annual revenues of $5 billion or less. To determine its 2019
annual revenues, Nonprofit Organizations must aggregate their revenues with those of their
affiliates. Nonprofit Organizations may use either of the following methods to calculate 2019
annual revenues for purposes of determining eligibility:
(1) A Nonprofit Organization may use its (and its affiliates’) annual “revenue” per its 2019
U.S. Generally Accepted Accounting Principles-based (U.S. GAAP) audited financial
statements; or
(2) A Nonprofit Organization may use its (and its affiliates’) annual receipts for the fiscal
year 2019, as reported to the Internal Revenue Service. For purposes of the Program,
the term “receipts” has the same meaning used by the SBA in 13 CFR 121.104(a).
(3) If a potential borrower (or its affiliate) does not yet have audited financial statements or
annual receipts for 2019, the borrower (or its affiliate) should use its most recent
audited financial statements or annual receipts.
Please see question H.10 with regard to financial records required for other Borrower
Certifications and Covenants. Please see Appendix C for the financial records requirements for
ongoing financial reporting.
E.5. Which entities are a Nonprofit Organization’s affiliates for purposes of the
employee and revenue eligibility criteria?
To determine eligibility, a Nonprofit Organization’s employees and 2019 revenues are
calculated by aggregating the employees and 2019 revenues of the Nonprofit Organization
itself with those of the Nonprofit Organization’s affiliated entities in accordance with the
affiliation test set forth in 13 CFR 121.301(f) (1/1/2019 ed.).
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/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
E.6. [Reserved.]
E.7. [Reserved.]
E.8. What does “significant operations in the United States” mean?
To determine if an Eligible Borrower has “significant operations” in the United States, the
Nonprofit Organization’s operations should be evaluated on a consolidated basis together with
its subsidiaries, but not its parent companies or sister affiliates. For example, an Eligible
Borrower has significant operations in the United States if, when consolidated with its
subsidiaries, greater than 50% of the Eligible Borrower’s:
• assets are located in the United States;
• annual net income is generated in the United States;
• annual net operating revenues are generated in the United States; or
• annual consolidated operating expenses (excluding interest expense and any other
expenses associated with debt service) are generated in the United States.
This is a non-exhaustive list of examples that reflects the principles that should be applied by a
potential borrower when evaluating its eligibility under this criterion.
E.9. Can a Nonprofit Organization that is a subsidiary of a foreign company qualify
as an Eligible Borrower?
An Eligible Borrower must be created or organized in the United States or under the laws of the
United States. For the avoidance of doubt, an Eligible Borrower may be a subsidiary of a
foreign entity, provided that the borrower itself is created or organized in the United States or
under the laws of the United States, and the borrower on a consolidated basis has significant
operations in and a majority of its employees based in the United States. However, an Eligible
Borrower that is a subsidiary of a foreign entity must use the proceeds of a Main Street loan
only for the benefit of the Eligible Borrower, its consolidated U.S. subsidiaries, and other
affiliates of the Eligible Borrower that are U.S. businesses. The proceeds of a Main Street loan
may not be used for the benefit of the activities conducted by such Eligible Borrower’s foreign
affiliates or subsidiaries.
E.10. Can an otherwise eligible Nonprofit Organization borrow if its affiliate has
already borrowed under a Main Street Facility, the MLF, or the PMCCF?
An affiliated group of entities can participate in only one Main Street facility, and cannot
participate in both a Main Street facility and the MLF or the PMCCF. Therefore, borrowers that
are otherwise eligible are subject to the following restrictions:
25
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August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
• If any affiliate of the Nonprofit Organization has participated in the MLF or the PMCCF,
the Nonprofit Organization may not borrow under any Main Street facility.
• If an affiliate has previously participated, or has a pending application to participate, in a
Main Street facility, the Nonprofit Organization can only participate in Main Street by
using the same Main Street facility accessed by its affiliate. For example, if an Eligible
Borrower’s affiliate has participated in the NONLF, then the Eligible Borrower would
only be able to participate in the NONLF and would be prohibited from participating in
the NOELF.
• In no case could the affiliated group’s total participation in a single Main Street facility
exceed the maximum loan size that the entire affiliated group is eligible to receive on a
consolidated basis. For example, in the case of the NONLF, the Eligible Borrower’s
maximum loan size would be the lesser of:
(1) $35 million (less any amount extended to an affiliate of the Eligible Borrower under
the NONLF);
(2) the Eligible Borrower’s average 2019 quarterly revenue; or
(3) the Eligible Borrower’s affiliated group’s average 2019 quarterly revenue.
For the avoidance of doubt, if an Eligible Borrower is the only entity in its affiliated group that
has sought funding through Main Street, its affiliated group’s average 2019 quarterly revenue is
not relevant to determining whether that Nonprofit Organization can qualify, except to the
extent that the Borrower’s subsidiaries are consolidated into its financial statements. (See
question H.10 for more information on consolidated financial statements.) If the Eligible
Borrower has an affiliate(s) that has previously borrowed or has an application pending to
borrow from a Main Street facility, then the entire affiliated group’s average 2019 quarterly
revenue is relevant to the determining the Eligible Borrower’s maximum loan size.
For more information on how to identify an Eligible Borrower’s affiliates, see question E.5
above.
E.11. [Reserved.]
E.12. [Reserved.]
E.13. Are Eligible Lenders required to adopt any special compliance procedures to
verify that a Borrower is not an “Ineligible Business” under
13 CFR 120.110(o)?
No. The terms of the Program do not impose any verification or other obligations on an Eligible
Lender specifically in relation to 13 CFR 120.110(o). As a general matter, Eligible Lenders that
are subject to regulations designed to prevent improper insider lending (e.g., the Board’s
26
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August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
Regulation O (12 CFR part 215)) should maintain compliance with those pre-existing rules and
regulations without exception or modification for Main Street.
Under the standard of reasonable, good-faith diligence specified in the Borrower Certifications
and Covenants, each prospective Main Street borrower is expected to review the list of
Ineligible Businesses in 13 CFR 120.110(b)-(j), (m)-(s), and make a reasonable, good-faith effort
to determine if its activities or ownership would cause it to be classified within one of the listed
ineligible categories, including 13 CFR 120.110(o).
E.14. [Reserved.]
E.15. How are “total expenses” and “average daily expenses” calculated for
purposes of determining Nonprofit Organization eligibility?
Total expenses are equal to total expenses as defined in IRS Form 990 Part IX Line 25 minus
depreciation, depletion and amortization as defined in IRS Form 990 Part IX Line 22. For
purposes of the ratio of liquid assets to average daily expenses, a Nonprofit Organization should
calculate average daily expenses as its total expenses for 2019, as described above, divided by
365.
E.16. How is “non-donation revenues” calculated for purposes of determining
whether a Nonprofit Organization has total non-donation revenues equal to
or greater than 60% of expenses for the period from 2017 through 2019?
Nonprofit organizations may refer to the Instructions to IRS Form 990 for purposes of
calculating whether they meet the eligibility criteria for non-donation revenues. For purposes
of these eligibility criteria, “non-donation revenues” is defined as all of the revenue items
described on Part VIII of the IRS Form 990 except revenue from: (i) fundraising events;
(ii) federated campaigns; (iii) membership dues; (iv) any contributions from donor advised
funds described in line 1d of Part VIII; and (v) all other contributions, gifts, grants, and similar
amounts in line 1f of Part VIII except for (A) grants from private foundations that are disbursed
over the course of more than one calendar year and (B) specified property. “Specified
property” for this purpose is any property contributed to the Nonprofit Organization other than
money, stocks, bonds, and other securities, provided that such specified property is not sold by
the Nonprofit Organization in a transaction unrelated to its tax-exempt purpose.
The following examples illustrate how different kinds of revenues would be treated for
purposes of the non-donation revenues calculation:
• Donations of noncash contributions as described in IRS Form 990:
o A Nonprofit Organization receives clothing donations from members of the
public that it sells in stores it operates and that primarily form the basis of the
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/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
Nonprofit Organization’s exemption from tax. The sale of these items would
generate either program service revenues or gross sales of inventory revenues—
both separately reported revenue sources on IRS Form 990—for the Nonprofit
Organization. The fair market value of the property in this case would be
included in non-donation revenues.
• Private grants:
o A Nonprofit Organization receives a grant from a private foundation that
provides for a recurring distribution of funds from 2018 through 2021, to allow
the Nonprofit Organization to conduct activities in connection with its charitable
purpose. Because this grant is a multi-year grant from the private foundation, it
would be included in non-donation revenues.
o A Nonprofit Organization receives a one-time grant from a private foundation.
While the private foundation may provide grants to the Nonprofit Organization
in the future, the grant itself pertains only to a single cash gift that is contributed
in full to the Nonprofit Organization. Because this grant is not a multi-year grant
from the private foundation, it would be excluded from non-donation revenues.
• Membership Dues:
o A Nonprofit Organization charges membership dues. These membership dues
consist of both (1) an amount equal to the fair market value of goods and
services provided (for example, access to an athletic facility operated by the
Nonprofit Organization), and (2) a charitable contribution, specifically, the
amount of the membership dues that exceed the fair market value of the goods
and services provided in connection with the membership fee. On IRS Form 990,
the amount paid for goods and services would be reported as Program Service
Revenues, while the excess amount would be reported as a membership fee.
The amount reported as Program Service Revenues would be included in non-
donation revenues, while the excess amount—the charitable contribution—
would be excluded from non-donation revenues.
E.17. Can a public hospital or a public college or university that is not recognized as
tax-exempt under section 501(c)(3) of the IRC qualify as a Nonprofit
Organization?
Public hospitals and public colleges and universities may not be recognized as tax-exempt
organizations under section 501(c)(3) of the IRC, but may qualify as tax-exempt under another
provision of the IRC. These organizations may qualify as an organization described in section
501(c)(3) of the IRC, and thus be considered “Nonprofit Organizations,” for purposes of the
NONLF and NOELF. To establish eligibility as a Nonprofit Organization, a public hospital or
28
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August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
public college or university must reasonably determine, in a written record maintained by the
organization, that it is an organization described in section 501(c)(3) of the IRC. 5
This guidance is solely for purposes of qualification as a “Nonprofit Organization” under the
Program and related purposes of the Program, and does not have any consequences for federal
tax law purposes.
E.18. Is a hospital owned by governmental entities considered an Ineligible
Business?
Under 13 CFR 120.110(j), “Government-owned entities (except for businesses owned or
controlled by a Native American tribe)” are considered Ineligible Businesses. However, a
hospital that is otherwise an Eligible Borrower is not rendered ineligible due to ownership by a
state or local government if the hospital receives less than 50% of its funding from state or local
government sources, exclusive of Medicaid. This exception to the general ineligibility of
government-owned entities is consistent with the approach adopted by the SBA for
determining PPP eligibility of hospitals.
E.19. How should a Nonprofit Organization calculate its non-donation revenues
and expenses for the period from 2017 through 2019 if it does not have
audited financial statements or annual receipts for fiscal year 2019 reported
to the IRS?
To be eligible under the NONLF and NOELF, a Nonprofit Organization must have average total
annual non-donation revenues equal to or greater than 60% of average annual expenses over
the three fiscal years that ended in 2017, 2018, and 2019. If a Nonprofit Organization does not
have audited financial statements or tax returns that include information on non-donation
revenues and expenses for fiscal year 2019, it may calculate its compliance with the non-
donation revenues test using information available for 2017 and 2018.
5
This determination need not account for the ancillary conditions set forth in section 501(r) of the Internal
Revenue Code and elsewhere associated with securing the tax exemption under that section. Section 501(r) states
that a hospital organization shall not be treated as described in section 501(c)(3) unless it meets certain
community health and other requirements. However, Nonprofit Organization is defined solely by reference to
section 501(c)(3), and section 501(r) does not amend section 501(c)(3). Therefore, for purposes of the NONLF and
NOELF, the requirements of section 501(r) do not apply to the determination of whether an organization is
“described in section 501(c)(3).”
29
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/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
F. Application Process
F.1. How can I apply for a Program loan?
To obtain a loan under the Program, an Eligible Borrower must submit an application and any
other documentation required by an Eligible Lender to such Eligible Lender. Eligible Borrowers
should contact an Eligible Lender for more information on whether the Eligible Lender plans to
participate in the Program and to request more information on the application process.
Updates regarding the Program, including the official launch date and the time and date at
which the Main Street SPV will begin purchasing participations in NONLF Loans and NOELF
Upsized Tranches, will be made available on the Board’s Main Street page.
F.2. Is a Nonprofit Organization eligible to borrow if it receives a PPP loan or
Economic Injury Disaster loan (EIDL)?
A Nonprofit Organization that receives a loan through the SBA’s PPP or EIDL program can be an
Eligible Borrower under Main Street if it meets the Eligible Borrower criteria.
F.3. Do Eligible Borrowers qualify automatically for a loan under the Program?
No. The term sheet contains minimum requirements for the Program. Eligible Lenders are
expected to conduct an assessment of each potential borrower’s financial condition at the time
of the potential borrower’s application. Eligible Lenders will apply their own underwriting
standards in evaluating the financial condition and creditworthiness of a potential borrower.
An Eligible Lender may require additional information and documentation in making this
evaluation and will ultimately determine whether an Eligible Borrower is approved for a
Program loan in light of these considerations. Nonprofit Organizations that otherwise meet the
Eligible Borrower requirements may not be approved for a loan or may not receive the
maximum allowable amount.
F.4. Can an Eligible Borrower apply for a Main Street loan through multiple
Eligible Lenders?
An Eligible Borrower may submit applications for a Main Street loan to more than one Eligible
Lender. However, an Eligible Borrower is required to notify each Eligible Lender to which it
submits an application of any other pending or accepted applications. This requirement is
reflected in Section 5.E of the Borrower Certifications and Covenants.
If an Eligible Borrower’s application for a Main Street loan is declined by an Eligible Lender, the
Eligible Borrower may apply through a different Eligible Lender.
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/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
G. Terms and Conditions
G.1. How will adjusted 2019 EBIDA be calculated?
See response to E.1 above.
G.2. How will “existing outstanding and undrawn available debt” be calculated?
“Existing outstanding and undrawn available debt” includes all amounts borrowed under any
loan facility, including unsecured or secured loans from any bank, non-bank financial institution,
or private lender, as well as any publicly issued bonds or private placement facilities. It also
includes all unused commitments under any loan facility, excluding (1) any undrawn
commitment that serves as a backup line for commercial paper issuance, (2) any undrawn
commitment that is used to finance receivables (including seasonal financing of inventory),
(3) any undrawn commitment that cannot be drawn without additional collateral, and (4) any
undrawn commitment that is no longer available due to change in circumstance. Existing
outstanding and undrawn available debt should be calculated as of the date of the loan
application.
G.3. Why are Program loans based on LIBOR rather than SOFR?
The Federal Reserve received feedback from potential participants that quickly implementing
new systems to issue loans based on SOFR would require diverting resources from challenges
related to the pandemic. Although financial institutions are transitioning to more robust
reference rates, LIBOR remains the most common base rate used in business lending, even
though firms cannot rely on LIBOR being published after the end of 2021. Consistent with the
recommendations of the Alternative Reference Rates Committee, Eligible Lenders and Eligible
Borrowers should include fallback contract language to be used should LIBOR become
unavailable during the term of the loan.
G.4. When do I need to start paying interest and principal on my loan?
No payments of principal will be required for the first two years of an NONLF Loan or NOELF
Upsized Tranche, and no payments of interest will be required during the first year of an NONLF
Loan or NOELF Upsized Tranche. Unpaid interest will be capitalized in accordance with the
Eligible Lender’s customary practices for capitalizing interest (e.g., at quarter-end or year-end).
After the first year interest will be payable in accordance with the loan agreement for the
NONLF Loan or NOELF Upsized Tranche.
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/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
G.5. How will principal be amortized after the second year?
No principal is paid in the first or second year. The loan will be amortized over the remaining
term of the loan, with 15% of principal due at the end of year 3, 15% of principal due at the end
of year 4, and a balloon payment of 70% of principal due at maturity at the end of year 5.
For purposes of this question, principal includes capitalized interest. Eligible Lenders will
provide Eligible Borrowers with payment information during the Program loan origination
process.
G.6. Is collateral required for Main Street loans?
NONLF Loans and NOELF Upsized Tranches may be secured or unsecured.
An NOELF Upsized Tranche must be secured if the underlying loan is secured. In such case, any
collateral securing the underlying loan (at the time of upsizing or on any subsequent date) must
secure the NOELF Upsized Tranche on a pari passu basis. Under such an arrangement, if the
borrower defaults, the SPV and lender(s) would share equally in any collateral available to
support the loan relative to their proportional interests in the loan (including the NOELF
Upsized Tranche). Eligible Lenders can require Eligible Borrowers to pledge additional collateral
to secure an NOELF Upsized Tranche as a condition of approval.
G.7. Are there fees associated with Main Street loans?
Yes, there are fees associated with the NONLF and NOELF.
• NONLF: Eligible Lenders will pay the Main Street SPV a transaction fee of 100 basis
points of the principal amount of the NONLF at the time of origination, and may pass on
this fee to Eligible Borrowers. 6 In addition, the Eligible Borrower will pay the Eligible
Lender a fee of up to 100 basis points of the principal amount of the NONLF Loan at the
time of origination. Eligible Lenders have discretion over whether and when to charge
Eligible Borrowers this fee.
• NOELF: Eligible Lenders will pay the Main Street SPV a transaction fee of 75 basis points
of the principal amount of the NOELF Upsized Tranche at the time of upsizing, and may
choose to pass on any portion of this fee to Eligible Borrowers. In addition, the Eligible
6
The transaction fee will be based on the principal amount of the NONLF Loan or NOELF Upsized Tranche at the
time a loan participation is submitted for sale to the Main Street SPV. Where deferred interest has been
capitalized and added to the principal amount and purchase amount, the transaction fee will be based on the
principal amount including such capitalized interest. As indicated in question G.4, unpaid interest should be
capitalized in accordance with the Eligible Lender’s customary practices for capitalizing interest (e.g., at quarter-
end or year-end). The Federal Reserve does not expect that interest would be capitalized more frequently than
monthly, and thus only expects capitalized interest to affect this calculation where loans were extended at least
one month prior to the date upon which the Main Street portal begins accepting submissions of NONLF and NOELF
loans for sale of participation interests.
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Borrower will pay an Eligible Lender a fee of up to 75 basis points of the principal
amount of the NOELF Upsized Tranche at the time of upsizing. Eligible Lenders have
discretion over whether and when to charge Eligible Borrowers this fee.
The SPV will pay an Eligible Lender 25 basis points of the principal amount of its participation
per annum for loan servicing.
G.8. What constitutes “reasonable efforts” to maintain payroll and retain
employees?
Eligible Borrowers should make reasonable efforts to retain employees during the term of the
NONLF Loan or NOELF Upsized Tranche. Specifically, an Eligible Borrower should undertake
good-faith efforts to maintain payroll and retain employees, in light of its capacities, the
economic environment, its available resources, and the need for labor. Borrowers that have
already laid off or furloughed workers as a result of the disruptions from COVID-19 are eligible
to apply for Main Street loans.
G.9. Can an Eligible Borrower receive more than one Main Street loan?
An Eligible Borrower may only participate in one of the Main Street facilities: the NONLF, the
NOELF, the MSNLF, the MSPLF, or the MSELF. However, an Eligible Borrower may receive more
than one loan under a single Main Street facility, provided that the sum of NONLF Loans cannot
exceed $35 million; and the sum of NOELF Upsized Tranches cannot exceed $300 million.
G.10. Can an Eligible Borrower receive a loan if its maximum loan size under a
facility’s term sheet test is below the minimum loan size for the same
facility?
No, borrowers may not receive a loan that is below the minimum loan size, which is $250,000
for NONLF Loans, and $10 million for NOELF Upsized Tranches.
G.11. How can an Eligible Borrower determine if its existing loans had an internal
risk rating equivalent to a “pass” in the FFIEC’s supervisory rating system on
December 31, 2019?
If an otherwise Eligible Borrower applies for a loan at an Eligible Lender with which it has an
outstanding loan, the Eligible Lender will make the determination of whether the borrower’s
existing loans have an internal risk rating that meets the requirements in the Main Street term
sheets. The Eligible Lender will also assess the potential borrower’s financial condition at the
time of the application.
33
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August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
G.12. Can a Lender charge a Borrower additional fees above the Main Street
origination fee and/or an interest rate above LIBOR + 300 basis points?
Eligible Lenders are allowed to charge Eligible Borrowers a one-time origination fee as set out in
the Main Street term sheets. In addition, Eligible Lenders may also require Eligible Borrowers
to pay the transaction fee, which the Eligible Lenders must in turn pay to the Main Street SPV.
Eligible Lenders are not permitted to charge Eligible Borrowers any additional fees, except
de minimis fees for services that are customary and necessary in the Eligible Lender’s
underwriting of loans to similar borrowers, such as appraisal and legal fees. Eligible Lenders
may also charge customary consent fees if such fees are necessary to amend existing loan
documentation in the context of upsizing a loan in connection with the NOELF. Eligible Lenders
should not charge servicing fees to Eligible Borrowers.
Main Street loans must have an interest rate of LIBOR (1 month or 3 month) + 300 basis points.
G.13. What methodology should be used to adjust EBIDA if an Eligible Lender has
used a range of methods in the past with respect to a single Eligible Borrower
or similarly situated borrowers?
An Eligible Lender should require the Eligible Borrower to adjust its 2019 EBIDA by using the
methodology that the Eligible Lender has previously required for EBIDA adjustments when
extending credit to the Eligible Borrower or, if the Eligible Borrower is a new customer, to
similarly situated borrowers on or before June 15, 2020. If an Eligible Lender has used multiple
EBIDA adjustment methods with respect to the Eligible Borrower or similarly situated
borrowers (e.g., one for use within a credit agreement and one for internal risk management
purposes), the Eligible Lender should choose the most conservative method it has employed. In
all cases, the Eligible Lender must select a single method used at a point in time in the recent
past and before June 15, 2020. The Eligible Lender may not “cherry pick” or apply adjustments
used at different points in time or for a range of purposes. The Eligible Lender should
document the rationale for its selection of an adjusted EBIDA methodology.
G.14. For purposes of adjusting EBIDA, how does an Eligible Lender identify
“similarly situated borrowers”?
Similarly situated borrowers are borrowers in similar sectors with comparable risk and size
characteristics. Eligible Lenders should document their process for identifying similarly situated
borrowers when they originate an NONLF Loan.
34
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August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
G.15. Why is the Federal Reserve allowing adjustments to EBIDA for purposes of
Main Street when it has noted supervisory concerns with these adjustments
in the past? Is there a limit to how much EBIDA can be adjusted?
It is normal industry practice for lenders and borrowers to agree to adjust a borrower’s EBIDA
to accommodate differences in operating models across sectors and to accommodate one-time
events that may positively or negatively impact a borrower’s earnings. When applied
prudently, these adjustments may provide a lender with a more accurate representation of a
Nonprofit Organization’s earnings capacity over time.
While the Main Street term sheets do not include limits on how much EBIDA can be adjusted,
there are important features of the Program that are designed to limit excessive risk-taking.
First, EBIDA adjustments must be of the type the Eligible Lender has previously (and recently)
required for the Eligible Borrower or similarly situated borrowers. The Eligible Lender should
document the rationale for its selection of an adjusted EBIDA methodology. See questions G.13
and G.14 above for more information.
In addition, the EBIDA-based leverage requirements should be viewed as minimum
requirements for the Program. Eligible Lenders are expected to conduct an assessment of each
potential borrower’s financial condition at the time of the borrower’s application.
Finally, the Program requires that a Main Street loan have an internal risk rating from the
Eligible Lender equivalent to a “pass” in the FFIEC’s supervisory rating system as of December
31, 2019. Loans that were criticized in the past for excessive adjustments would not be eligible
for the Program.
G.16. Do PPP loans count as “outstanding debt” for purposes of Main Street?
Yes. The portion of any outstanding PPP loan that has not yet been forgiven is counted as
outstanding debt for the purposes of the requirement that the Nonprofit Organization at the
time of origination of the loan or Upsized Tranche must have a ratio of (i) unrestricted cash and
investments to (ii) existing outstanding and undrawn available debt, plus the amount of any
loan under the Facility, plus the amount of any CMS Accelerated and Advance Payments, that is
greater than 55%.
G.17. How will Eligible Borrower prepayments of a Main Street loan be applied
against the principal amount due and future amortization payments?
Prepayment of principal is permitted without penalty and will reduce future payments in the
manner specified in the underlying loan documents. While lenders have flexibility in specifying
these terms, they should make efforts to align their approach with the expected amortization
schedule specified for each loan type. For example, applying prepayments to the next
scheduled principal payment due would maintain the alignment of later payments with the
35
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August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
amortization schedule and allow for the intended deferment of some portion of payments to
later years.
G.18. Can permissible fees charged at the time of origination be included in the
principal amount of a Main Street loan?
Yes. As indicated in questions G.7 and G.12, Eligible Lenders may charge certain fees to Eligible
Borrowers at the time of origination. Eligible Lenders may include such fees in the principal
amount of the Main Street loan, provided that the total Main Street loan amount, including
such fees, may not exceed the maximum loan size permitted for the Eligible Borrower under
the relevant Main Street facility.
G.19. Are Eligible Lenders allowed to include a LIBOR floor in the interest rate on a
Main Street Loan?
NONLF and NOELF must be adjustable-rate five-year term loans with an interest rate of 1-
month or 3-month LIBOR plus 300 basis points. LIBOR floors are not permissible.
G.20. [Reserved.]
G.21. Are there any prohibitions on the use of proceeds of a Main Street loan?
The Program is intended to help nonprofit organizations that were in sound financial condition
prior to the onset of the COVID-19 pandemic maintain their operations and payroll until
conditions normalize. An Eligible Borrower must use the proceeds of a Main Street loan only in
furtherance of the Eligible Borrower’s tax-exempt purpose as conducted by the Eligible
Borrower, its consolidated U.S. subsidiaries, and other affiliates of the Eligible Borrower that
are U.S. businesses. Program loans may not be used for:
• with respect to an Eligible Borrower that is a subsidiary of a foreign entity, for the
benefit of an Eligible Borrower’s foreign affiliates or subsidiaries (see question E.9); or
• to refinance or accelerate payment of existing debt, except under the limited exception
for mandatory and due debt and interest payments after the origination of the Main
Street loan (see question H.3).
In addition, under the Program an Eligible Borrower may not use any funds (including the
proceeds of a Main Street loan) during the term of the loan (and, in some cases, for 12 months
after the Main Street loan is repaid) for the following reasons:
• paying dividends, distributing capital, repurchasing equity, or paying compensation over
specified thresholds, except as provided under section 2.D, E, and F of the NONLF or
NOELF Borrower Certifications and Covenants or these FAQs (see question H.2); or
36
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
• repaying other debt ahead of schedule (see section 5.A of the NONLF or NOELF
Borrower Certifications and Covenants and question H.3).
G.22. Is an Eligible Lender restricted from setting monthly or quarterly interest
payments after the first year, or will interest be required to be payable
annually along with amortization payments of principal?
After the first year of the loan, an Eligible Lender may require the payment of interest at the
frequency it would ordinarily require payment with respect to loans made to similarly situated
borrowers (e.g., quarterly or annually). The Federal Reserve does not expect that the frequency
would ever be more than monthly.
G.23. Can an Eligible Lender require an Eligible Borrower to provide collateral or
guarantees solely with respect to the Eligible Lender’s 5% retained portion of
a Main Street loan?
No. The Eligible Lender and Main Street SPV must share losses on a pari passu basis (i.e.,
ratably, without preference). Any collateral pledged or guarantees made in connection with a
Main Street loan must apply to the entire NONLF Loan or NOELF Upsized Tranche.
G.24. Are personal guarantees required and/or permitted?
Personal guarantees are not required under Program terms. However, an Eligible Lender may
require a guarantee as part of its own underwriting process. As with collateral providing
security for a Main Street loan, guarantees must extend to the entire loan such that the Main
Street SPV and Eligible Lender share losses on a pari passu basis.
G.25. If an Eligible Borrower’s outstanding debt is maturing within 90 days, can a
Main Street loan be used to refinance such debt at the time of origination?
No. While Eligible Borrowers are permitted to refinance debt that is maturing within 90 days
during the life of a Main Street loan, it may not be done at origination.
G.26. Can an Eligible Lender or Eligible Borrower hedge interest rate and credit risk
in connection with Main Street loans?
Yes. Eligible Lenders and Eligible Borrowers may hedge interest rate risk associated with Main
Street loans. Eligible Lenders may also hedge credit risk associated with a Main Street
borrower’s industry, but may not engage in borrower name specific hedging of a Main Street
loan.
37
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August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
H. Certifications and Covenants
H.1. Are the required certifications and covenants under the NONLF and the
NOELF the same?
The certifications for Lenders and Borrowers vary by Main Street facility and are available
below:
• NONLF Borrower Certifications and Covenants
• NOELF Borrower Certifications and Covenants
• NONLF Lender Transaction Specific Certifications and Covenants
• NOELF Lender Transaction Specific Certifications and Covenants
H.2. What compensation, stock repurchase and capital distributions restrictions
apply?
The compensation, stock repurchase, and capital distribution restrictions that apply to direct
loan programs under section 4003(c)(3)(A)(ii) of the CARES Act apply under each of the NOELF
and NOSNLF. Detailed instructions are provided in the NONLF and NOELF Borrower
Certifications and Covenants.
H.3. What restrictions are placed on the Eligible Borrower’s ability to repay
existing debt?
The restrictions on repaying debt are similar for the NONLF Loan and NOELF Upsized Tranche.
The Eligible Borrower must commit to refrain from repaying the principal balance of, or paying
any interest on, any debt until the NONLF Loan or the NOELF Upsized Tranche is repaid in full,
unless the debt or interest payment is mandatory and due. The Eligible Borrower must also
commit that it will not seek to cancel or reduce any of its committed lines of credit with the
Eligible Lender or any other lender.
These covenants would not prohibit an Eligible Borrower from undertaking any of the following
actions during the term of the NONLF Loan or NOELF Upsized Tranche:
• repaying a line of credit (including a credit card) in accordance with the Eligible
Borrower’s normal course of business usage for such line of credit;
• taking on and paying additional debt obligations required in the normal course of
business and on standard terms, including inventory and equipment financing, provided
that such debt is secured only by the newly acquired property (e.g., inventory or
equipment), and, apart from such security, is of equal or lower priority than the NONLF
Loan or the NOELF Upsized Tranche; or
38
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August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
• refinancing debt that is maturing no later than 90 days from the date of such
refinancing.7
H.4. Is an Eligible Lender permitted to accept partial repayment of an Eligible
Borrower’s existing line of credit with the Eligible Lender?
The Eligible Lender would not be prevented from accepting repayments on a line of credit from
an Eligible Borrower in accordance with the Eligible Borrower’s normal course of business usage
for such line of credit.
H.5. What restrictions are placed on an Eligible Lender’s ability to cancel or
reduce any existing committed lines of credit outstanding?
An Eligible Lender must commit that it will not cancel or reduce any existing committed lines of
credit outstanding to the Eligible Borrower, except in an event of default. This requirement
does not prohibit the reduction or termination of uncommitted lines of credit, the expiration of
existing lines of credit in accordance with their terms, or the reduction of availability under
existing lines of credit in accordance with their terms due to changes in borrowing bases or
reserves in asset-based or similar structures.
H.6. What is the Eligible Lender’s role in verifying certifications and covenants?
An Eligible Lender is required to collect the required certifications and covenants from each
Eligible Borrower at the time of origination or upsizing. Eligible Lenders may rely on an Eligible
Borrower’s certifications and covenants, as well as any subsequent self-reporting by the Eligible
Borrower. The Eligible Lender is not expected to independently verify the Eligible Borrower’s
certifications or actively monitor ongoing compliance with covenants required for Eligible
Borrowers under the Main Street term sheets. If an Eligible Lender becomes aware that an
Eligible Borrower made a material misstatement or otherwise breached a covenant during the
term of an NONLF Loan or NOELF Upsized Tranche, the Eligible Lender should notify the FRB
Boston. For more detail, please see the NONLF and NOELF Lender Transaction-Specific
Certifications and Covenants.
H.7. What debt and interest payments are considered “mandatory and due”?
The debt repayment covenants generally prohibit an Eligible Borrower from repaying the
principal balance of, or paying any interest on, any debt until the Main Street loan is repaid in
full, unless the principal or interest payment is “mandatory and due.” With respect to debt that
predates the Main Street loan, principal and interest payments are “mandatory and due”:
7
Eligible Lenders and Eligible Borrowers are expected to act in good faith with respect to this requirement and in
light of the goals of Main Street.
39
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August 24, 2020. It is no longer effective.
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/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
• on the future date upon which they were scheduled to be paid as of the date of
origination of the Main Street loan, or
• upon the occurrence of an event that automatically triggers mandatory prepayments
under a contract for indebtedness that the Eligible Borrower executed prior to the date
of origination of a Main Street loan, except that any such prepayments triggered by the
incurrence of new debt can only be paid if such prepayments are de minimis.
For the avoidance of doubt, under the Program, Eligible Borrowers may continue to pay, and
Eligible Lenders may request that Eligible Borrowers pay, interest or principal payments on
outstanding debt on (or after) the payment due date, provided that the payment due date was
scheduled prior to the date of origination of a Main Street loan. Eligible Borrowers may not
pay, and Eligible Lenders may not request that Eligible Borrowers pay, interest or principal
payments on such debt ahead of schedule during the life of the Program loan, unless required
by a mandatory prepayment clause as specifically permitted above.
For future debt incurred by the Borrower in compliance with the terms and conditions of the
Program loan, principal and interest payments are “mandatory and due” on their scheduled
dates or upon the occurrence of an event that automatically triggers mandatory prepayments.
See question H.3 above for more information about the debt payment covenants generally,
including with respect to treatment of lines of credit.
H.8. Can an Eligible Borrower receive an NONLF Loan or an NOELF Upsized
Tranche if its existing debt arrangements require prepayment of an amount
that is not de minimis upon the incurrence of new debt?
If an Eligible Borrower has an existing debt arrangement that requires prepayment of more
than a de minimis amount upon the incurrence of new debt, the Eligible Borrower cannot
receive an NONLF Loan or an NOELF Upsized Tranche unless such requirement is waived or
reduced to a de minimis amount by the relevant creditor.
H.9. How must a Main Street borrower demonstrate that it is “unable to secure
adequate credit accommodations from other banking institutions”?
Being unable to secure adequate credit accommodations does not mean that no credit from
other sources is available to the borrower. Rather, the borrower may certify that it is unable to
secure “adequate credit accommodations” because the amount, price, or terms of credit
available from other sources are inadequate for the borrower’s needs during the current
unusual and exigent circumstances. Borrowers are not required to demonstrate that
applications for credit had been denied by other lenders or otherwise document that the
amount, price, or terms of credit available elsewhere are inadequate. See the NONLF and
NOELF Borrower Certifications and Covenants for details.
40
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August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
H.10. How should Eligible Borrowers prepare financial records and make financial
calculations in connection with section 4.A of the Borrower Certifications and
Covenants?
Under section 4.A of the Borrower Certifications and Covenants for the NONLF and NOELF, the
Eligible Borrower must certify that (i) it has provided financial records to the Eligible Lender and
a calculation of the Borrower’s (and, if relevant, the Borrower’s affiliates’) unrestricted 2019
operating revenue, adjusted 2019 earnings before interest, debt, and amortization (“EBIDA”)
and the proxy for endowment income, reflecting only those adjustments permitted pursuant to
the methodology that the Borrower agreed upon with the Eligible Lender; (ii) it has provided to
the Eligible Lender financial records and a calculation of the Borrower’s (and, if relevant, the
Borrower’s affiliates’) average 2019 quarterly revenue and eligibility criteria described in
subparts (7) - (9) of question E.1; and (iii) such financial records fairly present, in all material
respects, the financial condition of such entities for the period covered thereby in accordance
with U.S. GAAP (if applicable), consistently applied, and that such adjusted EBIDA calculations
are true and correct in all material respects. A Borrower should prepare the required financial
calculations in a manner consistent with past practice, to the extent applicable. Eligible
Borrowers are expected to submit statements to their Eligible Lender as follows. 8
• U.S. GAAP Compliance: Eligible Borrowers that are subject to U.S. GAAP reporting
requirements or that already prepare their financials in accordance with U.S. GAAP must
submit U.S. GAAP-compliant financial records in connection with this certification.
Eligible Borrowers that do not have to comply with U.S. GAAP and that do not typically
prepare their financials in accordance with U.S. GAAP are not required to submit U.S.
GAAP-compliant financials.
• Financial Statements: Eligible Borrowers that typically prepare audited financial
statements must submit audited financial statements. Otherwise Eligible Borrowers
should submit reviewed financial statements or financial statements prepared for the
purpose of filling returns with appropriate tax authorities. If an Eligible Borrower does
not yet have audited or reviewed financial statements for 2019, the Eligible Borrower
should use its most recent audited or reviewed financial statements. If an Eligible
Borrower’s fiscal year 2019 does not coincide with calendar year 2019, it may use its
2019 fiscal year, unless otherwise required by the Eligible Lender.
• Consolidation: Eligible Borrowers that typically prepare financial statements that
consolidate the Eligible Borrower with its subsidiaries (but not its parent companies or
8
The same framework should be applied to affiliates or selected subsidiaries of the Eligible Borrower, where
applicable.
41
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August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
sister affiliates) 9 must submit such consolidated financial statements. If an Eligible
Borrower does not typically prepare consolidated financial statements, it is not required
to do so, unless so required by the Eligible Lender.
The relevant inputs to the Eligible Borrower’s EBIDA calculation, which will reflect adjustments
permitted pursuant to the methodology to which the Eligible Borrower agreed with the Eligible
Lender, should come from the Eligible Borrower’s financial statements, as outlined above.
Please see question E.4 with regard to financial records required to calculate 2019 revenues for
purposes of determining eligibility under the Program. Please see Appendix C for the financial
records requirements for ongoing financial reporting.
H.11. In certifying that an Eligible Borrower or Eligible Lender is not a “covered
entity” under the conflicts of interest certification, what level of reasonable
diligence is required with regard to equity interests (including non-voting
preferred stock) held by financial intermediaries?
Section 4019(c) of the CARES Act requires each Eligible Borrower and Eligible Lender to certify
to the Secretary and the Board that it is not an entity in which the President, Vice President,
head of an executive department, member of Congress, or certain immediate family members
of such government officials (each, a Covered Individual) directly or indirectly holds a
“controlling interest.” In light of limited public information on ownership interests of
government officials and their family members, the instructions to the conflicts of interest
certification prescribe the level of diligence required to make a conflicts of interest certification
in good faith. The reasonable diligence standard establishes a standard that is both necessary
and sufficient for the entity to undertake in making the conflicts of interest certification, and is
consistent among all Federal Reserve lending programs and facilities that involve funds invested
by the Treasury Department under authority provided by the CARES Act. An Eligible Borrower
or Eligible Lender may choose, but is not required, to take additional steps in conducting
diligence.
To be an Eligible Borrower, a Nonprofit Organization must either (i) certify that the Nonprofit
Organization is not a ”covered entity” within the meaning of section 4019(c) of the CARES Act,
or (ii) certify that the Nonprofit Organization does not have and cannot issue equity interests,
such that section 4019(c) of the CARES Act is inapplicable.
9
Please see question E.10 for instances where the Eligible Borrower will separately need to calculate the average
2019 quarterly revenue of its entire affiliated group. In addition, the Borrower Certifications and Covenants
require Eligible Borrowers that are holding companies, all or substantially all of the assets of which comprise equity
interests in other entities, to calculate the average 2019 quarterly revenue of “Selected Subsidiaries” as defined in
the Borrower Certifications and Covenants.
42
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August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
• For a Nonprofit Organization that certifies it is not a “covered entity” within the
meaning of section 4019(c):
o The reasonable diligence standard applies to all types of equity interests, as
defined by section 4019(a)(6) of the CARES Act, including common stock,
preferred stock, and equivalent interests in limited liability companies or
partnerships. In all cases, an Eligible Lender or Eligible Borrower must consider
its actual knowledge, determine whether beneficial owners of any 5% or greater
equity interest are Covered Individuals and, if necessary, ask the beneficial
owners to confirm whether they are Covered Individuals. If information
regarding beneficial ownership has been disclosed pursuant to sections 13(d)
and 13(g) of the Securities Exchange Act of 1934 (Exchange Act), the Eligible
Borrower or Eligible Lender may rely on this information in addition to its actual
knowledge.
o Beneficial owners may hold their positions through financial intermediaries (e.g.,
broker-dealers, custodians, and investment funds). As with all types of equity
interests, to satisfy the reasonable diligence standard discussed above and set
out in the certification instructions, the Eligible Borrower or Eligible Lender must
consider, with respect to equity interests held by financial intermediaries, its
actual knowledge (including information contained in Exchange Act beneficial
ownership disclosures, if available) and, based on this information, determine
whether any identified beneficial owners of any 5% or greater equity interest are
Covered Individuals.
o For example, Lender A has 100 shares of non-voting preferred stock outstanding
for which the Exchange Act does not require beneficial ownership disclosure.
Fifteen percent of Lender A’s preferred shares are held by a financial
intermediary. With respect to these shares, Lender A considers its actual
knowledge, including all information it has regarding beneficial ownership of its
preferred shares (recognizing that there are no Exchange Act section 13(d) or
13(g) disclosures). In this case, Lender A is not required to take further action
and has satisfied the reasonable diligence standard.
• For a Nonprofit Organization that does not have and cannot issue equity interests:
o For a Nonprofit Organization that does not have and cannot issue equity
interests, section 4019(c) of the CARES Act would be inapplicable. Because such
Nonprofit Organizations do not have and cannot issue equity interests, they
cannot be “covered entities” in which government officials and their family
members own a controlling interest. These entities would not need to engage in
43
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/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
any due diligence with respect to ownership due to the legal impossibility of
being “covered entities” for purposes of the CARES Act.
H.12. How should Eligible Borrowers calculate “total compensation” for purposes
of complying with limits on compensation under the direct loan restrictions?
Total compensation is defined as salary, bonuses, awards of stock, and other financial benefits
provided by the Eligible Borrower and its affiliates to an officer or employee of the Eligible
Borrower, but does not include the value of severance pay or other benefits paid in connection
with a termination of employment. The following framework, which is represented in this
flowchart, should be used by the Eligible Borrower to calculate total compensation.
An Eligible Borrower may choose to calculate total compensation in a manner consistent with
the federal tax rules if the Eligible Borrower meets the criteria described in (a) or (b) below. An
Eligible Borrower that does not choose to calculate compensation in a manner consistent with
the federal tax rules must calculate total compensation according to the methodology set out
in item 402(c) of the Securities and Exchange Commission’s Regulation S-K (item 402(c))
(17 CFR 229.402(c)(2)). Eligible Borrowers must choose which approach to use upon
disbursement of the Main Street loan and apply it for as long as the Main Street loan is
outstanding and for 12 months thereafter. However, as described in Question H.13 below, an
Eligible Borrower that has chosen to use the federal tax rules may later be required to switch to
using item 402(c).
(a) Small Eligible Borrowers. An Eligible Borrower that had gross revenues for its financial
year ending in 2019 of less than or equal to $10,000,000, may calculate total
compensation in a manner consistent with the federal tax rules.
(b) Officers and Employees that receive limited deferred compensation. An Eligible
Borrower that had gross revenues for its financial year ending in 2019 of greater than
$10,000,000, may calculate compensation in a manner consistent with the federal tax
rules for all officers or employees who are not Significant Deferred Compensation
Recipients. A Significant Deferred Compensation Recipient means an officer or
employee who, during any 12-month period beginning January 2019 and until
12 months after the date on which the Main Street loan is no longer outstanding, has
total compensation that exceeds $425,000, out of which the fair value of deferred
compensation granted to such officer or employee exceeds 30 percent.
Deferred compensation is a legally binding right to receive compensation awarded to an
officer or employee in one taxable year but not payable until a later taxable year.
Eligible Borrowers should use U.S. GAAP to determine which of its officers and
employees are Significant Deferred Compensation Recipients.
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Eligible Borrowers that choose to calculate total compensation according to the federal tax
rules must use the timing and valuation methodology, including the valuation of fringe benefits
and bonuses, that apply for purposes of determining when amounts are treated as wages under
Internal Revenue Code section 3401(a) for income tax withholding. In addition, total
compensation as calculated under the federal tax rules includes commissions, educational
assistance, and benefits or wages that are paid in kind (such as meals or lodging) if they would
be treated as taxable compensation subject to federal income tax withholding under Internal
Revenue Code section 3401(a) applicable to U.S. citizen employees in a state or the District of
Columbia (regardless of whether the compensation paid to the individual is actually subject to
federal income tax withholding, and whether or not tax is actually withheld). 10
H.13. What if an Eligible Borrower chooses, at the time of disbursement of the
Main Street loan, to calculate total compensation using the federal tax rules
for all officers or employees that were not Significant Deferred
Compensation Recipients (as defined in question H.12), and the Eligible
Borrower later increases the amount of deferred compensation so that one
or more of these individuals become Significant Deferred Compensation
Recipients?
An Eligible Borrower described in (b) of question H.12 must begin calculating total
compensation according to item 402(c) immediately with respect to any officer or employee
that becomes a Significant Deferred Compensation Recipient, and continue doing so for the
remaining period that the Main Street loan is outstanding and for 12 months thereafter. In
such cases, the Eligible Borrower must include in any such officer’s or employee’s total
compensation calculated according to item 402(c) any deferred compensation that was granted
but not paid in the preceding 90-day period. An Eligible Borrower that meets the criteria under
(a) of question H.12 (i.e., had gross revenues for its financial year ending in 2019 of less than or
equal to $10,000,000) at the time of loan disbursement and chooses to use the federal tax rules
to calculate total compensation is not required to use item 402(c) for any employee or officer
that is or becomes a Significant Deferred Compensation Recipient at any time.
10
See e.g., Internal Revenue Service Publication 15, Publication 15-A, and Publication 15-B, which provide a
summary of the rules applicable to employers for reporting wages, including fringe benefits.
45
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/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
H.14. [Reserved.]
H.15. [Reserved.]
H.16. [Reserved.]
H.17. [Reserved.]
H.18. Do certifications and covenants apply to successors?
An Eligible Borrower also must commit to comply with certifications and covenants included in
the Borrower Certifications and Covenants, including repurchase, capital distribution, and
compensation restrictions that apply to direct loan programs under section 4003(c)(3)(A)(ii) of
the CARES Act. If a Borrower is acquired or otherwise merged into another business, the
acquiring or resulting entity would generally assume all rights and obligations of the Borrower,
including the rights and obligations of the predecessor entity under a Main Street loan. 11
H.19. How do the compensation, capital distribution, and stock repurchase
restrictions apply to an organization in which more than one entity borrows
from the Main Street Lending Program?
The restrictions on compensation, stock repurchase, and capital distributions apply to the
Eligible Borrower. Accordingly, if two affiliates borrow from the Main Street Lending Program
each would be subject to the restrictions on compensation, capital distributions, and stock
repurchases. Note that some restrictions also affect affiliates that are not borrowers. For
example, the calculation of total compensation includes salary, bonuses, and other financial
benefits received by an officer or employee from the Eligible Borrower and its affiliates.
For additional information on aggregation rules for other criteria (e.g., employees and
revenues) see questions E.5 and E.10.
I. Lender Information
I.1. Which financial institutions are eligible to make loans under the Program?
U.S. federally-insured depository institutions (including banks, savings associations, and credit
unions), U.S. branches or agencies of foreign banks, U.S. bank holding companies, U.S. savings
and loan holding companies, U.S. intermediate holding companies of foreign banking
organizations, or any U.S. subsidiary of any of the foregoing are eligible to participate in the
Program. At this time, nonbank financial institutions are not considered Eligible Lenders for
11
Borrowers should ensure that any such transaction complies with their loan agreement, and that all required
consents or waivers are obtained.
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purposes of the Program. However, the Federal Reserve is considering options to expand the
list of Eligible Lenders in the future.
I.2. How should an Eligible Lender evaluate an Eligible Borrower’s
creditworthiness?
Eligible Lenders should view the eligibility criteria in the term sheets as the minimum
requirements for the Program. Eligible Lenders are expected to conduct an assessment of each
potential borrower’s financial condition at the time of the potential borrower’s application.
Eligible Lenders will apply their own underwriting standards in evaluating the financial
condition and creditworthiness of a potential borrower. An Eligible Lender may require
additional information and documentation in making this evaluation and will ultimately
determine whether an Eligible Borrower is approved for a Program loan in light of these
considerations. Nonprofit Organizations that otherwise meet the Eligible Borrower
requirements may not be approved for a loan or receive the maximum allowable amount.
I.3. Can multiple affiliated Eligible Lenders participate in Main Street?
Yes. Multiple affiliated entities may register as Eligible Lenders under the Program.
I.4. Will standard loan documents be provided for Main Street loans, or should
Eligible Lenders use their own loan documentation?
Each participating Eligible Lender should use its own loan documentation in relation to Main
Street loans. Such documentation should be substantially similar, including with respect to
required covenants, to the loan documentation that the Eligible Lender uses in its ordinary
course lending to similarly situated borrowers, adjusted only as appropriate to reflect the
requirements of the Program. Appendix A contains a checklist of the items that must be
reflected in the loan documentation in order for the Main Street SPV to purchase a
participation in a loan. Appendix B includes certain model covenants that Eligible Lenders can
elect to reference when drafting their loan documentation in order to satisfy the Appendix A
requirements. Appendix C includes a list of the financial information that Eligible Lenders must
require Eligible Borrowers to provide on an ongoing basis until the loans mature
I.5. How should an Eligible Lender account for the transfer of an undivided
participation interest in the loan to the Main Street SPV?
The transfer of an undivided participation interest in an NONLF Loan or an NOELF Upsized
Tranche is structured with the intent to (a) meet the accounting definition of a participating
interest; (b) qualify as a true sale under the Bankruptcy Code; and (c) meet the criteria for sale
accounting outlined in ASC 860, Transfers and Servicing.
47
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The Federal Reserve expects that an Eligible Lender would generally be able to support the
conclusion that the transfer of a participation interest in an NONLF Loan or an NOELF Upsized
Tranche made in accordance with the Program requirements qualifies for sale accounting under
ASC 860. However, an Eligible Lender will need to evaluate any entity-specific considerations in
determining the appropriate conclusion.
For the NOELF, the accounting considerations described above relate to situations where an
Eligible Lender has appropriately concluded that the NOELF Upsized Tranche is a separate and
distinct unit of account for accounting purposes. This conclusion will vary depending on
transaction-specific considerations as an Eligible Lender has the ability to customize certain
details that may be pertinent to the unit of account analysis. Factors that an Eligible Lender
should consider in evaluating whether the NOELF Upsized Tranche can be considered a
separate and distinct unit of account, apart from the existing term loan or revolving credit
facility, for accounting purposes include, but are not limited to:
• the characteristics of the NOELF Upsized Tranche compared to the characteristics of the
existing term loan or revolving credit facility (e.g., maturity date, amortization schedule,
collateral requirement, payment date, and interest rate); and
• how an Eligible Lender operationalizes the NOELF Upsized Tranche, including whether
scheduled principal and interest payments are commingled with payments on the
existing term loan or revolving credit facility, whether the payments made by the
Eligible Borrower clearly indicate which loan the payment is intended to settle, and
whether the Eligible Lender separately maintains detailed record-keeping.
Federal Reserve staff has discussed the broad terms and intent of the Program with staff of the
SEC’s Office of the Chief Accountant (OCA). OCA staff have indicated they are available for
consultation on an entity’s specific facts and circumstances as needed.
I.6. Do the participation interests purchased by the Main Street SPV under the
Program constitute “true participations”?
The Federal Reserve has designed the legal forms and agreements to facilitate a determination
that the participation interests purchased by the Main Street SPV in NONLF Loans or NOELF
Upsized Tranches are “true participations.” As such, the participation interests by the Main
Street SPV have characteristics of true participations under the Bankruptcy Code, including the
following:
• Sections 2.1(c) and 4.3 of the Participation Agreement explicitly reflect the intention of
the parties to effect a true sale. Section 2.1(b) of the Participation Agreement provides
that it is the parties’ intent to sell an undivided participation interest in 95% of an
NONLF Loan or an NOELF Upsized Tranche. Further, sections 4.3 and 5.3 of the
Participation Agreement state that there is a complete and irrevocable transfer by the
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Eligible Lender of the rewards and risks of ownership of the participation interest.
Further, section 2.1(d) makes clear that the participation interest cannot be put-back,
voided, or rescinded. While the Eligible Lender will retain bare legal title to the portion
of the NONLF Loan or NOELF Upsized Tranche underlying the participation interest,
retention of title in this manner is not inconsistent with the sale of a participation
interest in a loan.
• The Eligible Lender does not guarantee repayment of the participation interest or the
NONLF Loan or NOELF Upsized Tranche underlying the participation interest, nor is
there any other recourse inconsistent with a sale of the participation interest.
• Sections 2.1(b) and 8 of the Participation Agreement provide for a pure pass-through to
the Main Street SPV of amounts paid by the Eligible Borrower under an NONLF Loan or
an NOELF Upsized Tranche, excluding the Eligible Lender’s retained beneficial interest (a
5% beneficial interest in each NONLF Loan or NOELF Upsized Tranche). The proceeds of
the participation interest will not be commingled with the Eligible Lender’s funds for any
significant period of time. Pursuant to Section 8.1 of the Participation Agreement, (i)
the Eligible Lender will accept and hold any distributions that the Eligible Lender
receives in respect of the participation interest for the account and sole benefit of the
Main Street SPV, (ii) the Eligible Lender has no equitable or beneficial interest in such
distributions, which are property of the Main Street SPV, and (iii) the Eligible Lender is
required to deliver any distribution to the Main Street SPV promptly.
• The participation interest will also have the same duration as the underlying NONLF
Loan or NOELF Upsized Tranche.
• Pursuant to the Servicing Agreement, the Eligible Lender will provide Enhanced
Reporting Services (as defined in the Servicing Agreement) to the Main Street SPV with
respect to the participation interest. As compensation for the Enhanced Reporting
Services, the Main Street SPV will pay the Eligible Lender a servicing fee in the amount
of 0.25% per annum of the total principal amount of the participation interest. The
Federal Reserve believes that the terms of the Servicing Agreement are commercially
reasonable and comparable to terms that unaffiliated third parties would accept to
provide Enhanced Reporting Services, under the terms and conditions set out in the
Servicing Agreement, with respect to the participation interest.
• By agreeing to borrow in connection with the Program, each Eligible Borrower must
consent to the Eligible Lender’s sale of the participation interest in the NONLF Loan or
NOELF Upsized Tranche, as applicable, to the Main Street SPV.
• The Eligible Lender has agreed to act on behalf of the Main Street SPV with respect to
the Main Street SPV’s participation interest in the NONLF Loan and the NOELF Upsized
Tranche. With respect to Core Rights Acts, Section 11.1 of the Participation Agreement
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provides that the Eligible Lender shall only take (or refrain from taking) Core Rights Acts
in accordance with the prior instructions of the Main Street SPV. Pursuant to Section
12.1 of the Participation Agreement, the Eligible Lender will not be held to the standard
of care of a fiduciary, but will exercise the same duty of care with respect to the
administration and enforcement of the participation interest as it would exercise if it
held the participation interest solely for its own account.
• Sections 11.1(c), 15.1 and 15.2 of the Participation Agreement provide elevation rights
for the Main Street SPV, which establish circumstances under which the Main Street SPV
can request the Eligible Lender to use best efforts or commercially reasonable efforts, as
applicable, to effectuate a full assignment of the legal title to the portion of the NONLF
Loans or NOELF Upsized Tranche underlying the participation interest.
I.7. Does the sale of participation interests to the Main Street SPV meet the
criteria for a true sale under the Bankruptcy Code?
The sale of a participation interest in an NONLF Loan or an NOELF Upsized Tranche is structured
to be a true sale, and the Program transaction terms are consistent with a true sale, including:
• The express language in section 2.1(b) of the Participation Agreement reflecting the
intent of the parties to sell an undivided participation interest in 95% of an NONLF Loan
or an NOELF Upsized Tranche.
• The economic substance of the transfer of the participation interest from the Eligible
Lender to the Main Street SPV under the Participation Agreement is a sale.
• The language in sections 4.3 and 5.3 of the Participation Agreement providing for a
complete and irrevocable transfer by each Eligible Lender of the rewards and risks of
ownership of the participation interest, as well as the language in section 2.1(d) making
clear that the participation interest cannot be put-back, voided, or rescinded.
• Any change in the value of the participation interest will not be for the benefit or loss of
the Eligible Lender.
• The Eligible Lender will receive the entire consideration for the participation interest
representing at least the fair market value for the participation interest on the
applicable closing date. There will not be any post-closing adjustment of the purchase
price, and the Eligible Lender does not have any right or obligation to transfer additional
property to the Main Street SPV.
• The Participation Agreement makes explicit the parties’ intention for the Eligible Lender
to relinquish the benefits and risks associated with ownership of the participation
interest.
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In addition to the above, the Federal Reserve Bank of Boston agrees that it will not assert in any
proceeding that the sales of the participation interests are other than true sales constituting
true participations.
While not inconsistent with a true sale of participation interests, the Program does have certain
unique features including the following:
• Each Eligible Lender under the Program must retain its 5% of the NONLF Loan or NOELF
Upsized Tranche until (A) the underlying NONLF Loan or NOELF Upsized Tranche
matures or (B) neither the Main Street SPV nor a Governmental Assignee holds an
interest in the loan in any capacity, whichever occurs first.
• Under the NOELF, each Eligible Lender must also retain its interest in the underlying
loan until (A) such underlying loan matures, (B) the NOELF Upsized Tranche matures or
(C) neither the Main Street SPV nor a Governmental Assignee holds an interest in the
loan in any capacity, whichever occurs first.
It is important to note, however, that the Eligible Lender’s retained interest in the NONLF Loan,
NOELF Upsized Tranche, or NOELF underlying loan will be pari passu with the Main Street SPV’s
participation interest. Thus, the Eligible Lender’s retained interest in the NONLF Loan, NOELF
Upsized Tranche, or NOELF underlying loan does not provide credit support for the related
participation interest(s). As noted above, the material terms of the NONLF and NOELF are
consistent with a true sale determination.
I.8. Does the Main Street SPV have the right to put back the participation
interests to the Eligible Lender?
Neither the Eligible Lender nor any of its affiliates will have any right or obligation to purchase,
repurchase, acquire, or reacquire the participation interest or to substitute other assets for the
participation interest subsequent to sale to the Main Street SPV, or any right of first refusal, last
look, or other similar right with respect to a purchase of the participation interest, or any
obligation to pay any amount in connection with a loss of value with respect to the
participation interest once it has been sold to the Main Street SPV. Further, under section
2.1(d) of the Participation Agreement, the Main Street SPV has no right to put the participation
interest back to the Eligible Lender.
I.9. Do the participation interests purchased by the Main Street SPV potentially
qualify for a “safe harbor” in relation to FDIC resolution proceedings?
The Federal Reserve has structured the transfer of the interests in financial assets under the
Participation Agreement from the Eligible Lender to the Main Street SPV with the intent that it
would qualify for the safe harbor regulations adopted by the Federal Deposit Insurance
Corporation, under 12 CFR 360.6(d)(1), regarding the treatment of financial assets transferred
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in connection with a participation. This safe harbor provides protection to the transfer of
financial assets by an insured depository institution under a properly structured participation
without recourse that satisfies the safe harbor’s requirements by providing, in general, that the
Federal Deposit Insurance Corporation (as conservator or receiver of the institution) will not
reclaim or recover any such transferred financial assets, provided that such transfer satisfies
the conditions for sale accounting treatment under U.S. GAAP, other than the legal isolation
condition that is addressed by the safe harbor. The Federal Reserve has structured the
Program with the intent that participations purchased by the Main Street SPV should qualify as
“participations” within the meaning of 12 CFR 360.6(a)(7), as they are sales of an undivided
interest in an NONLF Loan or an NOELF Upsized Tranche, without recourse to the Eligible
Lender. Staff of the Federal Deposit Insurance Corporation were consulted in preparing this
response.
I.10. Do the participation interests purchased by the Main Street SPV potentially
qualify for a “safe harbor” in relation to NCUA resolution proceedings?
The Federal Reserve has structured the transfer of the interests in financial assets under the
Participation Agreement from the Eligible Lender to the Main Street SPV with the intent that it
would qualify for the safe harbor regulations adopted by the Board of the National Credit Union
Administration regarding the treatment of financial assets transferred in connection with a
participation, under 12 CFR 709.9(d)(1). This safe harbor provides protection to the transfer of
financial assets by a federally insured credit union under a properly structured participation
without recourse that satisfies the safe harbor’s requirements by providing, in general, that the
Board of the National Credit Union Administration (as conservator or receiver of the institution)
will not reclaim or recover any such transferred financial assets, provided that such transfer
satisfies the conditions for sale accounting treatment under U.S. GAAP, other than the legal
isolation condition that is addressed by the safe harbor. The Federal Reserve has structured the
Program with the intent that participations purchased by the Main Street SPV should qualify as
“participations” within the meaning of 12 CFR 709.9(a), as they are sales of an undivided
interest in an NONLF Loan or an NOELF Upsized Tranche, without recourse to the Eligible
Lender. Staff of the National Credit Union Administration were consulted in preparing this
response.
I.11. Does the Servicing Agreement contemplated between the Eligible Lender
and the Main Street SPV impact whether the sale of participation interests
can be considered a “true sale”?
No, the Federal Reserve believes that the terms of the Servicing Agreement are commercially
reasonable and comparable to terms to which unaffiliated third parties would agree to provide
Enhanced Reporting Services (under the terms and conditions set out in the Servicing
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Agreement) with respect to the participation interest. The Servicing Fee does not represent
any type of recourse or credit support for the participation interest, given that the fee is being
paid by the Main Street SPV to the Eligible Lender. The Main Street SPV may also terminate the
Servicing Agreement and remove the Eligible Lender as servicer at any time for “Cause,” as such
term is defined in the Servicing Agreement.”
I.12. Will payment-in-kind (“PIK”) interest that has accrued (but has not yet been
capitalized to principal) during the period of time starting on the date when
the loan agreement is funded to the date when the loan participation
purchase is funded be allocated to the Seller (i.e., the Eligible Lender)?
No. Under the Participation Agreement, all accrued, but uncapitalized PIK Interest on the
Purchase Amount of the loan that is participated is for the account of the Main Street SPV (as
the Buyer), regardless of when such interest accrued. Further, the Purchase Price is determined
based upon the Purchase Amount of the participation interest as of the effective date of the
Participation Agreement. Therefore, the Participation Agreement does not require the Main
Street SPV to pay for the accrued, but uncapitalized interest, if the interest has not yet been
added to the principal amount as of the effective date of the Participation Agreement.
I.13. Can an Eligible Lender that is a depository institution pledge its 5% of a Main
Street loan to a Federal Reserve Bank as collateral?
An Eligible Lender that is a depository institution may pledge its 5% of a Main Street loan,
provided that the loan meets the collateral eligibility requirements of its local Federal Reserve
Bank. General acceptance criteria for loans can be found in the Federal Reserve Collateral
Guidelines. A depository institution should contact its local Reserve Bank to discuss specific
questions regarding collateral eligibility or pledging procedures. The “Federal Reserve
Collateral Guidelines” and toll-free phone numbers and other contact information of each
Reserve Bank can be found on www.frbdiscountwindow.org.
I.14. Does a lender registered with the Program for purposes of the MSNLF,
MSELF, and MSPLF need to re-register to become an Eligible Lender for
purposes of the NONLF and NOELF?
A lender that has completed the lender registration process for participation in the Program,
including by submitting Lender Registration Certifications and Covenants, need not re-register
to become an Eligible Lender for purposes of the NONLF and NOELF, provided the lender
remains an Eligible Lender as defined in the Lender Registration Certifications and Covenants.
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J. Loan Participation
J.1. What loan documentation is required to sell a participation to the Main
Street SPV under the Program?
The Federal Reserve Bank of Boston’s Legal Forms and Agreements website includes the form
loan participation agreement, borrower and lender certifications and covenants, and other
related documentation necessary to effect the sale of a qualifying participation interest to the
Main Street SPV. See question I.4 for information about the underlying loan documentation.
J.2. What loan-level information will the SPV collect for credit monitoring
purposes?
See Appendix C.
J.3. Is there a limit to the volume of participations the Main Street SPV can
purchase from a single Eligible Lender?
Apart from the Program’s size and time limitations, there is no limit on the amount of
participations the Main Street SPV can purchase from a single Eligible Lender.
J.4. Under the Loan Participation Agreement, when can the Main Street SPV sell
its loan participation or elevate its loan participation into an assignment?
Under the Loan Participation Agreement, the Main Street SPV is generally permitted to sell its
participation (without elevating) only with the contemporaneous consent of the Eligible Lender.
In addition, it is generally permitted to elevate its participation into an assignment only with the
contemporaneous consent of the Eligible Borrower, the Eligible Lender, and other necessary
parties (i.e., the administrative agent in a multi-lender facility). However, the SPV may do the
following without such contemporaneous consent:
• It may sell or transfer its loan participation in full, but not in part, without elevating, at
any time to any Federal Reserve Bank, any vehicle authorized to be established by the
Board or any Federal Reserve Bank, any entity created by an act of Congress, or any
vehicle established or acquired by the Department of the Treasury or any other
department or agency of the federal government. These transfers cannot be
undertaken to effect a securitization.
• It may sell or transfer its loan participation, or elevate its participation to an assignment
(to itself or a third-party), upon the following events:
o at the option of the Main Street SPV, if the Eligible Borrower has failed to make
any payment due under its loan contract with the Eligible Lender and the
applicable grace period has elapsed;
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o at the option of the Main Street SPV, if the Eligible Borrower or the Eligible
Lender has become the subject of bankruptcy or other insolvency proceedings;
o automatically, if the Eligible Lender would take, or refrain from taking, an action
that would result in impermissible forgiveness of principal of the portion of the
Program loan beneficially owned by the Main Street SPV (to prevent a violation
of section 4003(d)(3) of the CARES Act); and
o if required to do so by a statute or court.
Please see the form Loan Participation Agreement Standard Terms and Conditions for more
detail regarding the above.
J.5. What role will the Main Street SPV play in the event an Eligible Borrower
enters distress?
Prior to an Eligible Borrower entering distress, the Main Street SPV will rely on the Eligible
Lender to service each Main Street loan in accordance with the standard of care set out in the
Loan Participation Agreement and in light of the duties of the Eligible Lender under the
Servicing Agreement. Except as set out in question J.4, the Main Street SPV cannot elevate its
interest during this time without the contemporaneous consent of the Eligible Borrower and
the Eligible Lender, and typically would not seek to do so.
Once an Eligible Borrower misses a mandatory and due payment on the Program loan (beyond
the applicable grace period), or the Eligible Borrower or Eligible Lender enters into bankruptcy
or other insolvency proceedings, the Main Street SPV will have the option to elevate its
participation to an assignment to be in privity with the Eligible Borrower. However, the Federal
Reserve does not expect the Main Street SPV to use this right as a matter of course. Rather, the
Federal Reserve would expect Eligible Lenders to follow market-standard workout processes
and to exercise the standard of care set out in the Loan Participation Agreement (i.e., to
exercise the same duty of care in approaching such proceedings as it would exercise if it
retained a beneficial interest in the entire loan). In general, the Federal Reserve expects that
the Main Street SPV generally would not expect to elevate and assign except in situations
where (i) the economic interests of the Eligible Lender and the Main Street SPV are misaligned,
or (ii) the loan amount is relatively large in comparison to other loans in the Main Street SPV’s
portfolio of participations.
J.6. How will the Main Street SPV approach decision-making with respect to its
voting rights under the Loan Participation Agreement or Co-Lender
Agreement?
Main Street is an emergency lending program, not a grant program. Consistent with
Section 13(3) of the Federal Reserve Act and the Federal Reserve’s obligations under the
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CARES Act, the Main Street SPV will make commercially reasonable decisions to protect
taxpayers from losses on Main Street loans and will not be influenced by non-economic factors
when exercising its voting rights under the Loan Participation Agreement or the Co-Lender
Agreement, including with respect to a borrower that is the subject of a workout or
restructuring.
J.7. Will the Main Street SPV assert special administrative priority under Section
507(a)(2) of the Bankruptcy Code for its claims against an Eligible Borrower in
bankruptcy proceedings?
No. Under the Loan Participation Agreement and Co-Lender Agreement, the Main Street SPV
(and any other entity that steps into its shoes) has waived and disclaimed its right to assert
special administrative priority under Section 507(a)(2) of the Bankruptcy Code. The Federal
Reserve believes that waiving and disclaiming its right to such priority will enhance the efficacy
of the Program and provide certainty to Eligible Lenders and Eligible Borrowers, without
compromising taxpayer protection.
• Taxpayer Recovery. The Federal Reserve has determined that failing to waive and
disclaim its right to assert this special priority may trigger technical cross-defaults
related to an Eligible Borrower’s other existing debt obligations, and could prevent
Eligible Borrowers from securing new debt, including potential Debtor-in-Possession
financing. Such consequences would undermine the Main Street SPV’s efforts to
maximize recovery for taxpayers, including in the case of an Eligible Borrower’s
restructuring or workout. Further, the assertion of this special priority could require
costly litigation in the case of any Eligible Borrower bankruptcy, which would limit net
recovery.
• Limited Scope of the Special Priority. Special priority is likely to improve taxpayer
recoveries only in limited situations. In general, special priority would enhance the
Federal Reserve’s recoveries only in some situations where the Main Street SPV is one
of multiple unsubordinated unsecured creditors of the Eligible Borrower at the time of
its bankruptcy, and only to the extent the SPV would not have to share its special
recoveries with other creditors due to underlying inter-creditor agreements.
• Efficacy of Main Street. The Federal Reserve also believes that failing to waive or
disclaim its rights to assert special priority may limit the efficacy of the Program,
because Eligible Lenders likely would be hesitant to use a Program that would
effectively subordinate the credit they have already extended to an Eligible Borrower.
• Other Taxpayer Protections. The NONLF and NOELF include features that are intended
to mitigate risk to the Federal Reserve and taxpayers. For example, Eligible Lenders are
required to retain a portion of each loan’s risk, the maximum loan size for each facility is
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limited by an Eligible Borrower’s existing leverage, and Eligible Borrowers are
constrained in their ability to prepay other existing debts. Further, an Eligible
Borrower’s loans outstanding with the Eligible Lender must have received an internal
FFIEC “pass” rating, as of December 31, 2019. Together, the Federal Reserve believes
that these and other design features are sufficient to protect taxpayers from losses.
K. Regulatory Treatment
K.1. What is the regulatory capital treatment for the interest in a Main Street loan
retained by an Eligible Lender?
The interest in the portion of a Main Street loan that is retained by an Eligible Lender should be
assigned the risk weight applicable to the counterparty for the loan—generally a 100% risk
weight for a corporate exposure under the standardized approach. 12 For purposes of risk-
based capital rules and leverage rules, the exposure amount for NONLF Loans and NOELF
Upsized Tranches is 5% of the NONLF Loan balance or NOELF Upsized Tranche balance,
respectively. With respect to the NOELF, this treatment applies only to the outstanding NOELF
Upsized Tranche balance; the underlying loan or line of credit would be subject to the capital
treatment that applied prior to the sale of the participation to the Main Street SPV.
Secured Main Street loans are eligible for the credit risk mitigation treatment in the
standardized approach provided that any collateral securing the loan is eligible financial
collateral. Eligible Lenders are not permitted to recognize collateral attributable to the Main
Street SPV’s interest for purposes of the credit risk mitigation treatment under the capital rule.
The treatment described above applies only to Eligible Lenders that are subject to the federal
banking agencies’ capital rule. Credit unions that participate in the Program are subject to any
capital requirements implemented by the National Credit Union Administration.
K.2. How will Program loans be treated for supervised firms subject to stress
testing?
The capital planning guidance issued by the Federal Reserve in 2015 (SR 15-18 and SR 15-19)
includes supervisory expectations for capital planning and stress testing for certain supervised
firms. Such firms should continue to reference that guidance when evaluating Program loans
for capital planning and stress testing purposes. Eligible Lenders subject to capital planning
guidance should evaluate only the retained portion of Program loans for capital planning and
12
In view of the diversity of legal and organizational structures used by nonprofit organizations, the risk weight
applicable to the Eligible Lender’s interest under the capital rule should be determined by the Eligible Lender
based on the facts and circumstances of the Eligible Borrower.
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stress testing purposes, as the sale of participations to the SPV will be structured as “true
sales.”
The supervisory stress test methodology to assign losses to and revenues stemming from
different types of exposures is publicly available and described in “Dodd-Frank Act Stress Test
2020: Supervisory Stress Test Methodology.”
K.3. Are Main Street loans for existing customers considered new accounts for
FinCEN Rule CDD purposes? Are lenders required to collect, certify, or verify
beneficial ownership information in accordance with the rule requirements
for existing customers?
FinCEN has provided the following guidance to the Board with respect to this question: If the
Main Street loan is being made to an existing customer and the necessary information was
previously verified, you do not need to re-verify the information. Furthermore, if Eligible
Lenders for purposes of the Program have not yet collected beneficial ownership information
on existing customers, such institutions do not need to collect and verify beneficial ownership
information for those customers applying for new Main Street loans, unless otherwise indicated
by the Eligible Lender’s risk-based approach to Bank Secrecy Act compliance.
K.4. How will federal supervisors treat loans extended through the Main Street
program?
Given the severe economic dislocations caused by the COVID-19 pandemic, many Main Street
loan applicants may be experiencing temporary cash flow disruptions. Supervisors
acknowledge the high degree of uncertainty in predicting COVID-19’s economic impact and
effect on individual borrowers. Eligible Lenders are encouraged to work with borrowers
affected by COVID-19 and may originate or expand loans to such borrowers under the Main
Street Program. An Eligible Lender should evaluate and satisfy itself with respect to a
borrower’s ability to repay Main Street Program loans. The assessments should consider a
borrower’s credit history and financial performance prior to the crisis, as well as its post
pandemic business prospects. Eligible Lenders should apply safe and sound credit risk
management policies and practices throughout the life of Main Street Program
loans. Supervisors will approach Program loans in a manner consistent with their supervisory
approach to other loans to nonprofit organizations. The supervisory approach for assessing the
safety and soundness of institutions given the ongoing impact of the COVID-19 pandemic is
outlined in SR 20-15.
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K.5. For an Eligible Lender that is a national bank or savings association, do
lending limits apply to the entire size of a Main Street loan, or only the
percentage of a loan that is retained by the Eligible Lender?
Loans made under the Main Street lending program apply towards an Eligible Lender’s lending
limit.
From the OCC: For Eligible Lenders that are national banks, federal savings associations, and
state savings associations, the Main Street loan should be treated as follows:
1. Funded Loan: If the Eligible Lender funded an NONLF Loan or an NOELF Upsized Tranche
to an Eligible Borrower before seeking to sell a participation to the Main Street SPV
(under the “Funded Loan” method described in question L.4), the full amount of the
loan would be treated as a loan by the Eligible Lender to the relevant Eligible Borrower
and would count towards the Eligible Lender’s lending limit. The full amount of the loan
will count towards the Eligible Lender’s lending limit until such time as the Main Street
SPV has purchased the participation (i.e., once the Eligible Lender has received full
payment by the Main Street SPV for the participation). After the purchase of the
participation by the Main Street SPV, the portion of the loan that has been sold as a
participation to the Main Street SPV would no longer be treated as a loan to the
relevant Eligible Borrower for purposes of the OCC’s lending limit regulations.
2. Condition of Funding: Under the Program, the Eligible Lender has the option of entering
into a loan agreement to extend an NONLF Loan or an NOELF Upsized Tranche to an
Eligible Borrower, for which the funding of such loan is contingent on the Eligible Lender
receiving a binding commitment from the Main Street SPV to purchase a participation in
the loan (as discussed under the “Condition of Funding” method described in question
L.4). If the Eligible Lender chooses this option and provides a Funding Notice to the
Main Street SPV by the specified deadline, the Eligible Lender need only include the
retained percentage of the loan when calculating its lending limit to the Eligible
Borrower. Loans extended in this manner are structured to be exempt loan
participations under the OCC’s regulation (12 CFR 32.2(q)(2)(vi)(A)-(B)). The Main Street
SPV will generally be able to advance funds to purchase the participation within one
business day of receiving notice from the Eligible Lender that it has funded the loan, if
such notice is received before 7 p.m. ET. In instances where funding from the Main
Street SPV occurs more than one business day after the loan is funded by the Eligible
Lender, provided such delays were outside of the Eligible Lender’s control, the entirety
of the loan will be treated as a loan to the relevant Eligible Borrower and count towards
the Eligible Lender’s lending limit, but any amount of the loan exceeding the Eligible
Lender’s lending limit will not be considered a violation and will instead be treated as
nonconforming for the interim period under 12 CFR 32.2(q)(2)(vi)(B). Once the Eligible
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Borrower receives full payment from Main Street SPV for the portion of the loan that
has been sold as a participation to the Main Street SPV, that portion of the loan will no
longer be treated as a loan to the relevant Eligible Borrower for purposes of the OCC’s
lending limit regulations.
Federal Reserve staff have consulted with staff of the OCC and the FDIC in providing this
response. OCC staff have indicated they are available for consultation on a national bank’s or
federal savings association’s specific facts and circumstances, as needed. FDIC staff have
indicated they are available for consultation on a state savings association’s specific facts and
circumstances, as needed.
Eligible Lenders that are state-chartered banks should review applicable state law to determine
to what extent a Main Street loan applies to its lending limit. State member and nonmember
banks should consult with their state banking supervisor.
K.6. For Eligible Lenders that are federally insured credit unions, does the
member business loan limit apply to the entire size of a Main Street loan, or
only the percentage of a loan that is retained by the Eligible Lender?
Under the Federal Credit Union Act, federally insured credit unions (whether federally or state
chartered) that are not exempt by statute are subject to an aggregate limit on “member
business loans” set forth in 12 U.S.C. § 1757a(a). The aggregate limit applies to all member
business loans made by a federally insured credit union under the Program, irrespective of any
advance commitment to purchase a participation interest prior to funding the loan. However,
when a participation interest in the Program loan is actually purchased and transferred to the
SPV, without recourse and qualifying for true sale accounting under U.S. GAAP, the portion of
the loan that has been sold as a participation shall no longer count toward the aforementioned
aggregate limit on member business loans. Other exceptions to and exclusions from the
member business loan limit are set forth in 12 U.S.C. § 1757a and 12 CFR 723.8.
Federal Reserve staff have consulted with staff of the NCUA in drafting this response. NCUA
staff have indicated they are available for consultation on a federally insured credit union’s
specific facts and circumstances as needed.
K.7. For Eligible Lenders that are federally insured credit unions, does the limit on
commercial loans to one member apply to the entire size of a Main Street
loan, or only the percentage of a loan that is retained by the Eligible Lender?
Under the NCUA’s regulations, the aggregate dollar amount of commercial loans to any one
borrower or group of associated borrowers may not exceed the greater of 15% of the federally
insured credit union's net worth or $100,000, plus an additional 10% of the credit union’s net
worth if the amount that exceeds the credit union’s 15% general limit is fully secured at all
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times with a perfected security interest by readily marketable collateral as defined in
12 CFR 723.2. Such limitation applies to all commercial loans made by a federally insured credit
union under this Program, irrespective of any advance commitment to purchase a participation
interest in the funded loan. Provided, however, that when the participation interest in the
Program loan is actually purchased and transferred to the SPV, the portion of the loan that has
been sold as a participation shall no longer count toward the aforementioned limit on
commercial loans to one borrower.
Federal Reserve staff have consulted with staff of the NCUA in drafting this response. NCUA
staff have indicated they are available for consultation on a federally insured credit union’s
specific facts and circumstances as needed.
Eligible Lenders that are state chartered credit unions should also review applicable state law to
determine to what extent a Main Street loan applies to any lending limit under state law.
L. Operational Details
L.1. How will the Federal Reserve administer the Program?
The Program will be administered by the FRB Boston, which has established the Main Street
SPV to purchase loan participations from Eligible Lenders in any of the twelve Federal Reserve
districts. Further detail regarding how the Program will be operationalized will be made
available in the future.
L.2. What information will the Federal Reserve disclose regarding the Main Street
facilities?
The Federal Reserve will disclose information regarding the NONLF and NOELF during the
operation of the facilities, including information regarding names of lenders and borrowers,
amounts borrowed and interest rates charged, and overall costs, revenues and other fees.
Loans made under the NONLF and NOELF will affect the size and composition of the Federal
Reserve’s balance sheet. Balance sheet items related to the NONLF and NOELF will be reported
weekly, on an aggregated basis, on the H.4.1 statistical release titled "Factors Affecting Reserve
Balances of Depository Institutions and Condition Statement of Federal Reserve Banks,"
published by the Federal Reserve. In addition, the Federal Reserve will disclose to Congress
information pursuant to Section 13(3) of the Federal Reserve Act, as amended by the Dodd-
Frank Wall Street Reform and Consumer Protection Act, and the Board’s Regulation A.
Under section 11(s) of the Federal Reserve Act, the Federal Reserve also will disclose
information concerning the facilities one year after the effective date of the termination by the
Board of the authorization of the facilities. This disclosure will include names and identifying
details of each participant in the facilities, the amount borrowed, the interest rate or discount
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paid, and information concerning the types and amounts of collateral pledged or assets
transferred in connection with participation in the facilities.
L.3. How will the remaining capacity of the Program be communicated?
The Federal Reserve will provide periodic reports on the size of the Program and its remaining
capacity.
L.4. Are Eligible Lenders required to commit and pre-fund loans under the
Program before the SPV has committed to purchase its participation in a
Program Loan?
No. Eligible Lenders have two options for funding loans under the Program:
1. Funded Loan: An Eligible Lender may extend an NONLF Loan or an NOELF Upsized
Tranche to an Eligible Borrower and fund such loan. The Eligible Lender, if registered
with the Program, can then seek to sell a participation in such loan to the Main Street
SPV by submitting all of the required documentation, completed and signed, for
processing. Upon determining that such paperwork is complete and consistent with
Program requirements (see FAQ L.7), the Main Street SPV would purchase a
participation in such loan by dating and countersigning the Participation Agreement and
returning it to the Eligible Lender.
In general, Eligible Lenders using this option must submit the loan to the Main Street
SPV for sale of a participation interest expeditiously (i.e., no later than 14 days) after the
closing of such loans. However, for the first 14 days that the SPV purchases
participations in NONLF and NOELF loans, it will accept submissions of any NONLF Loan
or NOELF Upsized Tranche for sale of a participation interest, provided that such NONLF
Loan or NOELF Upsized Tranche was originated after June 15, 2020 and before the date
that the relevant Main Street facility begins purchasing participations in NONLF and
NOELF loans.
2. Condition of Funding: An Eligible Lender may also extend an NONLF Loan or an NOELF
Upsized Tranche to an Eligible Borrower, but make the funding of such loan contingent
on a binding commitment from the Main Street SPV that it will purchase a participation
in the loan. Under this option, the Eligible Lender, if registered with the Program, would
submit all of the required documentation, completed and signed, for processing, but
would indicate in its submission that the loan has not yet been funded. The Main Street
SPV would review the required documentation and, if complete and consistent with
Program requirements (see FAQ L.7), would provide the Eligible Lender with a binding
commitment to purchase the loan after it is funded (Commitment Letter). The
Commitment Letter (template available here) will indicate that (i) the Eligible Lender is
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required to fund the loan within three business days of the date of the Commitment
Letter and (ii) the Eligible Lender must then provide notice to the Main Street SPV of the
date the funding occurred (Funding Notice) by entering the date in the appropriate field
in the Main Street Portal. 13 The Main Street SPV will generally be able to advance funds
to purchase the participation within one business day of receiving the Funding Notice, if
the Funding Notice is received before 7 p.m. ET. If the Funding Notice is submitted by
the Eligible Lender on or after 7 p.m. ET, the notice will be treated as if it were received
the next business day.
The Main Street SPV will then process its purchase of a participation in such loan on the
basis of the previously received paperwork. The Eligible Lender will not need to submit
the required documentation a second time. If Eligible Lenders elect to use this option,
the loan documentation should include language similar to the model provision below.
In the “Conditions to All Borrowings” section:
“(i) the [Eligible Lender] shall have received a commitment letter from MS
Facilities LLC that it will purchase a participation interest in $[PRINCIPAL
AMOUNT TO BE PARTICIPATED] aggregate principal amount of the [APPLICABLE
LOAN DEFINITION] under the Main Street Lending Program”
L.5. [Reserved.]
L.6. [Reserved.]
L.7. What conditions will the Main Street SPV place on purchasing participations
in Program loans?
The Main Street SPV intends to purchase 95% participations in any NONLF Loan or NOELF
Upsized Tranche that is submitted to the SPV for purchase, provided that (i) the required
documentation is complete and properly executed, and (ii) the required documentation
evidences that the loan is consistent with the relevant Main Street facility’s requirements. If
these requirements are met, the Main Street SPV intends to purchase the loan without
additional conditions.
The Federal Reserve encourages Eligible Lenders to fund NONLF Loans and NOELF Upsized
Tranches in advance of the opening of the Main Street SPV to purchase participations under the
NONLF and NOELF.
L.8. What financial information is an Eligible Borrower required to submit to an
Eligible Lender at the time of origination of a Main Street loan? What Eligible
13
The Main Street Portal can be found here.
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Borrower financial information is an Eligible Lender required to submit to the
Main Street Portal with other loan participation documentation?
An Eligible Borrower is required to provide an Eligible Lender with two sets of financial
information at the time of origination:
1. 2019 Financial Information and Financial Information Related to Eligibility Criteria:
o Data Requirements: As required under section 4.A of the Borrower
Certifications and Covenants, the Eligible Borrower must submit its 2019
financial records and financial records related to the borrower eligibility criteria
described in subparts (7) – (9) of question E.1 to its Eligible Lender (see question
H.10 for more information).
o Portal Input Requirements: The Eligible Lender must submit all 2019 financial
data and financial records related to the borrower eligibility criteria described in
subparts (7) – (9) of question E.1 described above in the Main Street Portal with
other loan participation documents at the time a loan is submitted to the Main
Street SPV for sale of a participation Specifically, the Eligible Lender must:
input the Eligible Borrower’s (1) 2019 revenues; (2) adjusted 2019 EBIDA;
(3) unrestricted 2019 operating revenue; (4) liquid assets at the time of
origination of the loan or Upsized Tranche; (5) average daily expenses
over the previous year; (6) unrestricted cash and investments; (7) existing
outstanding and undrawn available debt; (8) amount of any loan under
the Facility; (9) outstanding amount of any CMS Accelerated and Advance
Payments received by the Eligible Borrower; 14 and the Eligible Borrower’s
total assets, current assets, and current liabilities as of December 31,
2019,15 into the Main Street Portal’s data fields; 16 and
upload all other required 2019 financial data and financial records related
to the borrower eligibility criteria described in subparts (7) – (9) of
question E.1 (in the format in which the Eligible Borrower delivered it to
the Eligible Lender) to the Main Street Portal.
14
See E.1.
15
As indicated in FAQ H.10, if an Eligible Borrower typically prepares audited or reviewed financial statements and
does not yet have audited or reviewed financial statements for 2019, the Eligible Borrower should use its most
recent audited or reviewed financial statements. Eligible Borrowers that do not typically prepare audited or
reviewed financial statements should submit financial statements prepared for the purpose of filing taxes.
16
Except to the extent set forth in any separate certifications, covenants, or agreements provided by the Eligible
Lender (e.g., the Lender Transaction Specific Certifications and Covenants), and any standard of care or standard of
inquiry of the Eligible Lender set forth in those documents, the Lender assumes no obligation or liability with
respect to the accuracy and completeness of Eligible Borrower financial information provided or the failure of the
Eligible Borrower to provide such information.
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2. Most Recent Quarter at Time of Origination:
o Data Requirements: The Eligible Borrower must also submit financial data
consisting of all of the data fields required in Table II of Appendix C to these
FAQs (which vary by Main Street facility) for the most recent quarter available at
the time of origination of the Main Street loan.
o Portal Input Requirements: The Eligible Lender must input all of the data fields
set out in Table II of Appendix C to these FAQs into the Main Street Portal either:
at the time the other required documentation to sell a loan participation
is submitted; or
at a later date, not to exceed (i) 60 days after the submission of the
documentation required to sell a participation in the loan, or (ii) 15
business days after the Credit Monitoring17 module of the Main Street
Portal for nonprofit organizations becomes available, whichever is later.
Finally, for all Main Street loans, in addition to the above, Eligible Lenders may require other
financial information as appropriate under their underwriting practices. All data collected by
the Eligible Lender, including the data described above and any additional data collected,
should be uploaded to the Main Street Portal (in the format in which the Eligible Borrower
delivered it to the Eligible Lender) when the other required documentation to sell a loan
participation is submitted.
L.9. What information is an Eligible Lender required to submit to the Main Street
Portal in connection with the submission of the documentation required to
sell a loan participation to the Main Street SPV?
As set out in question L.8 above, an Eligible Lender must submit certain Eligible Borrower
financial information at the time a loan is submitted to the Main Street SPV for sale of a
participation, or within a given period of time following such submission. In addition, Eligible
Lenders are required to input the following fields into the Main Street Portal in order to
complete their submission to sell a loan participation to the Main Street SPV:
Borrower • Borrower Name
Identification • Borrower Address (street address, city, state/territory, and zip code)
• Borrower Primary Contact (name, email and phone number)
• Borrower ID (i.e., Dunn & Bradstreet Data Universal Numbering System (DUNS)
number (if applicable))
• Borrower North American Industry Classification System (NAICS) Industry Code
17
The Credit Monitoring module is the portion of the Main Street Portal that is used by an Eligible Lender to
upload financial information submitted by an Eligible Borrower on a quarterly and annual basis during the life of
the Main Street loan. The required data fields are described in Appendix C of these FAQs.
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• Borrower Legal Entity Type (i.e., type of “Business” (see FAQ E.2))
• Borrower Tax Identification Number
• Optional: Borrower Ultimate Parent (name, Tax Identification Number)
• Optional: Borrower Parent (name, Tax Identification Number)
Select • Business Establishment Date
Borrower • 2019 Adjusted EBIDA
Characteristics • 2019 Revenues
• Total Outstanding and Undrawn Debt
• Borrower Accounting Convention Information (accounting basis, fiscal year-end,
whether assets and liabilities are recorded at fair value on balance sheet)
• 2019 Select Balance Sheet Information (total assets, current assets and current
liabilities)
Loan • Loan Type (i.e., NONLF or NONELF)
Characteristics • Total Loan Amount (for NONLF)
• Upsized Tranche Amount (for NOELF)
• Lender Loan Number
• Loan Origination Date
• Loan Maturity Date
• Prior Loan Maturity Date and Origination Date (for NOELF)
• Loan Interest Rate and Interest Rate Index (i.e., LIBOR 1-month or LIBOR 3-
month)
• Interest Accrual Convention (i.e., 30/360; Act/360; Act/365; Act/Act)
• Interest Accrual and Interest Capitalization Accrual Month (i.e., month that
interest begins accruing and capitalizing)
• Interest Capitalization Frequency (i.e., annual, monthly, quarterly, semiannual)
• Interest Payment Frequency and Payment Day of Month
• Principal Amortization Schedule
• Lien Position (i.e., first, second, third, N/A)
• Guarantor (yes or no; if yes, provide name, email address and Tax Identification
Number)
• Collateral Type and Value, and Location if Collateral Type is Real Property (if
applicable)
• Lender Contact Information (Mailing address, contact person, telephone,
facsimile, email)
• Syndicated Loan (yes or no)
• Secured Loan (yes or no)
• Origination Fee (dollars and basis points)
• If Borrower Paid Transaction Fee (yes or no)
• Covenant Status including Default Date, Nature of Default, and Date of Covenant
Cure (if applicable)
• Default Interest Spread
• Senior Debt Balance
Legal • Title and Description of Credit Agreement
Agreements • Description of Tranche in the Credit Agreement
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and • Bilateral Facility
Certifications • Agent
• Elevation Transfer Fee Amount
• Whether the Loan is Funded (yes or no)
In addition to the information that must be input, the Eligible Lender is required to upload the
following documents:
• an Assignment Executed-in-Blank, completed and executed in accordance with the Main
Street Lending Program Instructions for Lender Required Documentation;
• for bilateral facilities, a Co-Lender Agreement (Transaction-Specific Terms only),
completed and executed in accordance with the Main Street Lending Program
Instructions for Lender Required Documentation;
• Borrower Certifications and Covenants (NONLF or NOELF, as applicable), completed and
executed in accordance with the Main Street Lending Program Instructions for Lender
Required Documentation;
• the credit agreement documenting the Main Street loan and other related credit
documents (e.g., intercreditor agreements, subordination agreements, security
agreements, etc.); and
• any financial information that the Eligible Borrower provided to the Eligible Lender, in
the format in which the Eligible Borrower provided it (see also FAQ L.8).18
The Main Street Legal Forms and Agreements can be found on the FRB Boston’s website.
L.10. What type of Lender Portal security is in place, such that lenders and
borrowers can be assured that their data will be maintained securely?
Information security is central to the design, implementation, and ongoing operation of the
Main Street Portal. This starts with the hosting environment; the Main Street Portal is hosted
on a platform that maintains a FedRAMP Moderate Authority to Operate (ATO). During the
Main Street Portal design and implementation, control requirements defined in the National
Institute of Standards and Technology (NIST) Special Publication 800-53 (Rev. 4) were adhered
to closely.
18
This obligation extends to financial records, including balance sheets, income statements, statements of cash
flows, or other similar financial statements of a general nature that are of the type required to be delivered by an
Eligible Borrower to an Eligible Lender under section 4.A of the Borrower Certifications and Covenants. The Eligible
Lender is not required to upload other information provided by the Eligible Borrower at the time of origination.
However, the Main Street SPV retains the option to collect from the Eligible Lender any additional information
provided by the Borrower at a later date.
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Detailed secure coding standards specific to the underlying platform informed the development
process. Robust application security testing was used to identify code quality issues and prior to
each major release, the Main Street Portal was subject to in depth penetration testing.
Secure operation and risk minimization were guiding principles throughout the process of
establishing the Main Street Portal.
L.11. If an Eligible Lender uses the Condition of Funding Model in Question L.4,
how should loan documents be prepared to reflect the required maturity
period, interest rate, deferral and accrual, principal amortization, and loan
number?
If an Eligible Lender elects to use the Condition of Funding Model set out in question L.4, the
credit agreement and other loan documents for a particular loan will need to be completed and
executed prior to submission to the Portal and funding of the loan. The Federal Reserve
suggests that Eligible Lenders refer to the following guidance for structuring loan
documentation to comply with Program requirements when using this model:
• Maturity and Payment Dates: Eligible Lenders should select a maturity date that is five
years from the date of the credit agreement (i.e., the Effective Date) to satisfy the five
year maturity requirement. The Eligible Lender should also select a principal and
interest payment schedule that is set based on the Effective Date. While the principal
amount of the loan will be outstanding for slightly less than five years due to the delay
in funding the loan, this will provide greater clarity to the Eligible Borrower, Eligible
Lender, and other parties regarding a date certain for the loan’s maturity and dates of
payment.
• Interest Rate: Eligible Lenders should identify the applicable reference rate (1 month or
3 month LIBOR) in the loan documents on the Effective Date and indicate in the Portal
the calculated interest rate, based upon the reference rate plus 300 basis points. While
the calculated rate may differ at the time of funding, identifying the applicable
reference rate in the loan documents on the Effective Date provides clarity as to how
the rate will be calculated.
• Interest Deferral, Accrual, and Capitalization: Eligible Lenders should measure interest
deferral and set an interest capitalization schedule based on the Effective Date of the
loan. However, the Eligible Borrower should not accrue interest until the loan is funded
by the Eligible Lender.
• Lender Loan Number: It is preferred that the Lender create a “Lender Loan Number” at
the time the credit agreement is written, even though the loan will not have been
funded at that time. If an Eligible Lender is unable to provide a “Lender Loan Number”
for the loan prior to funding, the Eligible Lender may use a temporary Lender Loan
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Number and subsequently update such number in connection with its submission of
Eligible Borrower financial information on a quarterly basis, as required under the
Servicing Agreement.
L.12. Can a single Main Street loan be made to multiple co-borrowers?
The nonprofit facilities are not yet operational. Staff expects that the Portal and its operational
capabilities will accommodate co-borrower arrangements. The Participation Agreement, Co-
Lender Agreement, Assignment Executed-in-Blank, and Servicing Agreement posted on the FRB
Boston’s website on July 31, 2020, have been drafted to accommodate co-borrower loans.
Instructions for completing and executing these forms and agreements for co-borrower loans,
making the required Borrower and Lender Transaction-Specific Certifications and Covenants
with respect to co-borrower loans, and submitting co-borrower loans to the Portal will be
issued in the coming weeks.
M. Other Information
M.1. Where should questions regarding the Program be directed?
Inquiries can be submitted by email to mslp@bos.frb.org.
M.2. How can I receive updates regarding changes to the Program?
The terms of the Program are available on the Board’s website and will be updated to reflect
modifications as they are made. Interested parties can sign up for alerts here.
M.3. Will the Federal Reserve provide further guidance on how to apply the terms
of the Program to individual borrowers?
The Federal Reserve and Treasury Department have designed Main Street to facilitate the
provision of credit to Eligible Borrowers of varying sizes, across a broad range of non-profit
sectors, in every state and territory of the United States. While the Federal Reserve will
continue its efforts to provide answers to questions of broad applicability, we are unable to
provide guidance with respect to an individual business’s financial, credit, or legal analysis or
decisions, which may be fact-specific or contingent on the applicable state’s or territory’s laws.
In cases where the Program term sheets, legal forms and agreements, and these FAQs do not
explicitly address a specific set of facts and circumstances, Eligible Borrowers should work with
Eligible Lenders and legal counsel to make informed, reasonable, good-faith applications of the
Program’s terms and conditions to their individual facts and circumstances.
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M.4. [Reserved.]
M.5. [Reserved.]
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Appendix A: Loan Document Checklist
Each participating Eligible Lender should use its own loan documentation in relation to Main Street loans. Such documentation
should be substantially similar, including with respect to required covenants, to the loan documentation that the Eligible Lender uses
in its ordinary course lending to similarly situated borrowers, adjusted only as appropriate to reflect the requirements of the
Program. In order for the Main Street SPV to participate in a loan, the loan documentation must reflect the required components
set out in the charts below.
NONLF NOELF
Term
Upsized Tranche Underlying Loan
1 Maturity 5 years 5 years remaining maturity of at least 18
months (taking into account any
adjustments made to the maturity of
the underlying loan after June 15,
2020, including at the time of upsizing)
2 Principal Deferral 2 years 2 years no requirements applicable under the
Program
3 Interest Deferral 1 year 1 year no requirements applicable under the
Program
4 Capitalization of Yes Yes no requirements applicable under the
Unpaid Interest Program
5 Interest Rate adjustable rate of LIBOR (1 or adjustable rate of LIBOR (1 or 3 month) no requirements applicable under the
3 month) + 300 basis points + 300 basis points Program
6 Principal 15% at the end of the third 15% at the end of the third year, 15% no requirements applicable under the
Amortization year, 15% at the end of the at the end of the fourth year, and a Program
Schedule fourth year, and a balloon balloon payment of 70% at maturity at
payment of 70% at maturity at the end of the fifth year
the end of the fifth year
7 Minimum Loan $250,000 $10 million no requirements applicable under the
Size Program
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NONLF NOELF
Term
Upsized Tranche Underlying Loan
8 Maximum Loan the lesser of (i) $35 million or the lesser of (i) $300 million or (ii) the no requirements applicable under the
Size (ii) the Eligible Borrower’s Eligible Borrower’s average 2019 Program
average 2019 quarterly quarterly revenue;
revenue;
9 Priority / Security May not include any May not include any provisions that would cause the NOELF Upsized Tranche to
Requirement provisions that would cause be contractually subordinated to other debt in or outside of bankruptcy.
the NONLF Loan to be
contractually subordinated to Must include a standard lien covenant or negative pledge that is of the type and
other debt in or outside of that contains the exceptions, limitations, carve-outs, baskets, materiality
bankruptcy. thresholds, and qualifiers that are consistent with those used by the Eligible
Lender in its ordinary course lending to similarly situated borrowers.
• See Appendix B for a model covenant.
• For NOELF Upsized Tranches where the underlying loan is part of a multi-
lender facility, any lien covenant or negative pledge that was negotiated
in good faith prior to June 15, 2020, as part of the underlying loan shall
be deemed sufficient.
10 Prepayment permitted without penalty permitted without penalty no requirements applicable under the
Program
11 Type term loan term loan term or revolving credit facility
12 Origination Date after June 15, 2020 after June 15, 2020 on or before June 15, 2020
13 Borrower Must include a Borrower Must include a Borrower Certifications and Covenants material breach
Certifications and Certifications and Covenants mandatory prepayment provision to the extent feasible in light of existing voting
Covenants material breach mandatory arrangements (see Appendix B for more information).
Material Breach prepayment provision (see
Mandatory model provision in Appendix
Prepayment B).
14 Cross- Must include a cross Must include a cross acceleration provision (see model provision in Appendix B).
Acceleration acceleration provision (see
Provision
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NONLF NOELF
Term
Upsized Tranche Underlying Loan
model provision in Appendix For NOELF Upsized Tranches where the underlying loan is part of a multi-lender
B). facility, any cross-default or cross-acceleration provision that was negotiated in
good faith prior to June 15, 2020, as part of the underlying loan shall be deemed
sufficient.
15 Collateral If secured, collateral should be If secured, collateral should be described in accordance with the bank’s ordinary
described in accordance with practices in its loan documentation
the bank’s ordinary practices
in its loan documentation.
16 Financial Must include a quarterly Must include a quarterly financial reporting covenant requiring the financial
Reporting financial reporting covenant information set out in Appendix C (see model covenant in Appendix B).
requiring the financial
information set out in For NOELF Upsized Tranches where the underlying loan is part of a multi-lender
Appendix C (see model facility, any financial reporting provision that was negotiated in good faith prior
covenant in Appendix B) to June 15, 2020, as part of the underlying loan shall be deemed sufficient.
In addition to the above, any Eligible Lender that elects to make receipt of a binding commitment letter from the Main Street SPV a condition of
closing (see question L.4 above), should include language similar to the model provision below in its loan documentation:
In the “Conditions to All Borrowings” section:
“(i) the [Eligible Lender] shall have received a commitment letter from MS Facilities LLC that it will purchase a participation interest in
$[PRINCIPAL AMOUNT TO BE PARTICIPATED] aggregate principal amount of the [APPLICABLE LOAN DEFINITION].
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Appendix B: Required Covenants in Loan Documentation
Each participating Eligible Lender should use its own documentation for Main Street loans.
Such documentation should be substantially similar, including with respect to required
covenants, to the loan documents that the Eligible Lender uses in its ordinary course lending to
similarly situated borrowers, adjusted only as appropriate to reflect the requirements of the
Program. Appendix A sets out the components that must be reflected in such documentation.
Model covenants are provided below in relation to #9, #13, #14, and #16 of Appendix A.
Please note: Eligible Lenders are not required to use the model covenants provided; these are
provided only as examples for the convenience of Eligible Lenders. Eligible Lenders are
permitted to use variations of such provisions to the extent they serve the same substantive
purpose and are otherwise substantially similar to provisions that the Eligible Lender uses in its
ordinary course lending to similarly situated borrowers.
I. Priority and Security Covenant
Each Main Street facility includes a requirement concerning the priority and/or security of the
loan, which must be reflected in the loan documentation through the presence or absence of
certain covenants.
I.A. NONLF Loans
NONLF Loans must not be, at the time of origination or at any time during the term of the
NONLF Loan, contractually subordinated in terms of priority to any of the Eligible Borrower’s
other loans or debt instruments. See question B.3 for more information about how to interpret
this term. In accordance with this term, the loan documentation should not include any
provisions that would cause the NONLF Loan to be contractually subordinated to any other
debt whether in or outside of bankruptcy. For the avoidance of doubt, prohibitions on
contractual subordination do not prevent the incurrence of obligations that have mandatory
priority under the Bankruptcy Code or other insolvency laws, or other relevant law or
regulation, that apply to entities generally.
I.B. NOELF Upsized Tranches that are Part of Bilateral Facilities
NOELF Upsized Tranches must be, at the time of origination and at all times thereafter, senior
to or pari passu with, in terms of priority and security, the Eligible Borrower’s other Loans or
Debt Instruments (other than Mortgage Debt). See question D.11 for more information about
how to interpret these terms in the context of the NOELF.
In accordance with this term, the loan documentation for NOELF Upsized Tranches that are part
of bilateral facilities (i.e., where the Eligible Lender is the only lender) should not include any
provisions that would cause the NOELF Upsized Tranche to be contractually subordinated to
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any other debt whether in or outside of bankruptcy. See section I.A of this Appendix B for more
information.
In addition, the loan documentation for NOELF Upsized Tranches that are part of bilateral
facilities must contain a lien covenant or negative pledge that is of the type – and that contains
exceptions, limitations, carve-outs, baskets, materiality thresholds, and qualifiers – that is
consistent with those used by the Eligible Lender in its ordinary course lending to similarly
situated borrowers. A model lien covenant is set out below for the convenience of Eligible
Lenders.
In the “Negative Covenants” section:
“The Borrower will not, nor will it permit any subsidiary to, create, incur, assume or suffer
to exist any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, securing any debt for borrowed money or any obligations evidenced
by a bond, debenture, note, loan agreement or other similar instrument, or any guarantee
of the foregoing, other than the following:
(a) Liens securing obligations under the [NOELF loan];
(b) [Liens on real property in connection with loans with respect to which
substantially all of the proceeds were used for acquisition, construction, fit-
out, and/or renovation of the property];
(c) [Junior Liens securing permitted Indebtedness]; or
(d) [Liens on receivables assets and related assets incurred in connection with a
receivables facility, provided that such debt is secured only by the newly
acquired property].
Lien covenants included in Main Street loan documentation may include carve-outs at the
discretion of the Eligible Lender in accordance with its customary underwriting practices with
respect to similarly situated borrowers. The carve-outs from the lien covenant listed above
illustrate the types of carve outs, among others, that Eligible Lenders may choose to include in a
Main Street loan’s lien covenant.
I.C. NOELF Upsized Tranches that are Part of Multi-Lender Facilities
NOELF Upsized Tranches must be, at the time of origination and at all times thereafter, senior
to or pari passu with, in terms of priority and security, the Eligible Borrower’s other Loans or
Debt Instruments (other than Mortgage Debt). See question D.11 for more information about
how to interpret this term.
In accordance with this term, the loan documentation for NOELF Upsized Tranches that are part
of multi-lender facilities (i.e., where there are multiple lenders) should not include any
provisions that would cause the NOELF Upsized Tranche to be contractually subordinated to
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any other debt whether in or outside of bankruptcy. See section I.A of this Appendix B for more
information.
For NOELF Upsized Tranches that are part of multi-lender facilities, the facility must include a
provision like the one described in section I.B of this Appendix B, unless the loan
documentation has a lien covenant that was negotiated in good faith prior to June 15, 2020.
II. Borrower Certifications and Covenants Material Breach
Mandatory Prepayment Provision
Each participating borrower must submit signed Borrower Certifications and Covenants in
connection with the Main Street Loan. If the Board determines that the borrower made a
material misstatement in certifications, or materially breached covenants, relating to
CARES Act, the Federal Reserve Act, or the Board’s Regulation A, the Board will notify the
Eligible Lender to trigger a mandatory prepayment requirement under the Main Street loan. To
implement these measures, the Borrower Certifications and Covenants should be referenced in
loan documents for Main Street loans as set out below.
II.A. NONLF Loans and NOELF Upsized Tranches that are Part of Bilateral
Facilities
For all NONLF Loans NOELF Upsized Tranches that are part of a bilateral facility, the loan
documents must contain a mandatory prepayment provision related to a material breach of the
Eligible Borrower certifications in Section 2 (CARES Act Borrower Eligibility Certifications and
Covenants) and Section 3 (FRA and Regulation A Borrower Eligibility Certifications) of the
Borrower Certifications and Covenants. A model provision is set out below for convenience.
In the “Mandatory Prepayment” section:
“If, on any date (such date, a “Trigger Date”), the Board of Governors of the Federal
Reserve System or a designee thereof has, after consultation with [the Administrative
Agent][the Eligible Lender], notified [the Administrative Agent][the Eligible Lender] in
writing that the Borrower has materially breached, made a material misrepresentation
with respect to or otherwise failed to comply with certifications in Section 2 (CARES Act
Borrower Eligibility Certifications and Covenants) or Section 3 (FRA and Regulation A
Borrower Eligibility Certifications) of the Borrower Certifications and Covenants in any
material respect or that any such certification has failed to be true and correct in any
material respect, then [the Administrative Agent][the Eligible Lender] shall promptly so
notify the Borrower and the Borrower shall, no later than two (2) Business Days after such
Trigger Date, prepay the [Eligible Loan] in full, along with any accrued and unpaid interest
thereon.”
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II.B. NOELF Upsized Tranches that are Part of Multi-Lender Facilities
For NOELF Upsized Tranches that are part of multi-lender facilities, a mandatory prepayment
provision substantially similar to the model mandatory prepayment provision set out in
section II.A of this Appendix B must be included if the percentage (or number) of lenders
required to consent to a new mandatory prepayment provision under the existing agreements
(typically a simple majority) consents to any other changes to the loan documents in the
process of upsizing the loan or selling the participation to the Main Street SPV. Further, if 100%
of the lenders agree to any other changes to the loan documents in the process of upsizing the
loan or selling the participation to the Main Street SPV, this mandatory prepayment provision
must be inserted into the loan documents and treated as a “sacred right,” the amendment,
waiver, or modification of which would require 100% lender consent.
III. Cross-Acceleration Provision
Each Main Street loan should contain a cross-acceleration provision that would trigger an event
of default under the Main Street loan if a different loan extended to the Eligible Borrower by
the Eligible Lender or the Eligible Lender’s commonly controlled affiliate is accelerated.
III.A. NONLF Loans and NOELF Upsized Tranches that are Part of Bilateral
Facilities
For all NONLF Loans and NOELF Upsized Tranches that are part of a bilateral facility, the loan
documents must contain a cross-acceleration provision that would be triggered if other debt
owed by the Eligible Borrower to the Eligible Lender or any commonly controlled affiliate of the
Eligible Lender is accelerated. A model provision is set out below for the convenience of Eligible
Lenders.
In the “Event of Default” section:
“(i) [the Borrower or any Subsidiary shall fail to make any payment when due (whether
by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in
respect of any Indebtedness (other than Indebtedness under the Loan Documents) owing
to the [ELIGIBLE LENDER] or any commonly controlled Affiliate of the [ELIGIBLE LENDER],
in each case beyond the applicable grace period with respect thereto, if any; or (ii) the
Borrower or any Subsidiary shall fail to observe or perform any other agreement or
condition relating to any such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event occurs, the effect of which
failure to make a payment, default or other event described in cause (i) or (ii) is to cause
such Indebtedness to become due or to be repurchased, prepaid, defeased or redeemed
(automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such
Indebtedness to be made, prior to its stated maturity; provided that clause (ii) shall not
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apply to secured Indebtedness that becomes due as a result of the voluntary sale or
transfer of the property or assets securing such Indebtedness, if such sale or transfer is
permitted hereunder and under the documents providing for such Indebtedness and such
Indebtedness is repaid when required under the documents providing for such
Indebtedness; provided that, as used in this clause, the term “Indebtedness” shall mean
all debt for borrowed money and any obligations evidenced by a bond, debenture, note,
loan agreement or other similar instrument, and any guarantee of any of the foregoing”
III.B. NOELF Upsized Tranches that are Part of Multi-Lender Facilities
For NOELF Upsized Tranches that are part of multi-lender facilities, the facility must include a
provision like the one described in section III.A of this Appendix B, unless the loan
documentation has a cross-default or cross-acceleration provision that was negotiated in good
faith prior to June 15, 2020.
IV. Financial Reporting Covenant
Each Main Street loan should contain a financial reporting covenant requiring the regular
delivery of certain financial information and calculations.
IV.A. NONLF Loans and NOELF Upsized Tranches that are Part of Bilateral
Facilities
For NONLF Loans and NOELF Upsized Tranches that are part of a bilateral facility, the loan
documents must contain a financial reporting covenant requiring the quarterly delivery of
Borrower financial information and calculations set out in Appendix C. A model covenant is set
out below for the convenience of Eligible Lenders.
In the “Affirmative Covenants” section:
“as soon as available, but in any event within [60] days after the end of each fiscal quarter
of the Borrower, the Borrower shall deliver to the [Administrative Agent] [Eligible Lender]
financial reporting in a form and substance reasonably acceptable to the [Administrative
Agent] [Eligible Lender] setting forth the financial information, and where applicable
reasonably detailed calculations of the required data, set forth in [See Appendix C to these
FAQs] as at the end of such fiscal quarter of the Borrower, which financial reporting and
calculations, in each case, shall be true and accurate in all material respects and, where
applicable, present fairly in all material respects the financial condition of the Borrower
for the period covered thereby in accordance with GAAP, consistently applied.”
IV.B. NOELF Upsized Tranches that are Part of Multi-Lender Facilities
For NOELF Upsized Tranches that are part of multi-lender facilities, the facility must include a
provision like the one described in section IV.A of this Appendix B, unless the loan
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documentation has a financial reporting covenant that was negotiated in good faith prior to
June 15, 2020.
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Appendix C: Required Financial Reporting
Each Main Street loan should contain a financial reporting covenant requiring the regular
delivery of certain financial information and calculations. The items listed in Table I below must
be provided by each Main Street borrower to their Eligible Lender at least annually. The items
listed in Table II must be provided by each Main Street borrower to their Eligible Lender at least
quarterly; the quarterly requirements vary based on the Main Street facility in which the
borrower is participating. Eligible Lenders will specify the required reporting standards and
forms for each Eligible Borrower.
Table I: Data Required Annually from All Nonprofit Organization Borrowers
Required Data and Definition
Information
Total Assets The sum of current assets, fixed assets, and other non-current assets (including, but
not limited to, intangible assets, deferred items, investments, and advances).
Current Assets Cash, accounts receivable, inventory, and other short-term assets that are likely to be
converted into cash, used, sold, exchanged, or otherwise expensed in the normal
course of business within one year.
Total Cash & Investments All cash & investments - both restricted and unrestricted
Unrestricted Cash & The portion of cash and investments that are not restricted for any reason including
Investments by donor-imposed stipulations. If applicable, this includes Cash and investments (at
the borrower and affiliated foundations) plus funds held in trust by others plus
pledges receivable reported in permanently restricted net assets, less permanently
restricted net assets.
Total Liabilities The total amount of all outstanding obligations, both current and noncurrent.
Current Liabilities Short term debt, accounts payable, and other current liabilities that are due within
one year.
Net Assets Total Assets less Total Liabilities - including both restricted and unrestricted assets
and fund balances.
Unrestricted Net Assets Total Assets less Total Liabilities - adjusted to exclude restricted assets & fund
balances and associated liabilities.
Total Debt (Incl. Undrawn Existing outstanding and committed debt (including any undrawn available amounts,
Available Lines of Credit) unfunded pension liabilities, operating leases and guaranteed portions of off-balance
sheet debt).
Total Revenue Total income generated excluding any non-recurring items.
Operating Revenue All unrestricted revenue (including gifts for operations and government operating
appropriations), excludes funds to be spent on capital (grants, appropriations, or net
assets released), and replaces unrestricted investment gains or losses with a proxy for
endowment spending.
Gross Revenue from Total income generated from Medicare and Medicaid, including Medicare and
Medicare & Medicaid Medicaid managed care plans (if applicable).
Net Income The income (or loss) after expenses and losses have been subtracted from all
revenues and gains for the fiscal period, including discontinued operations.
80
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
Table I: Data Required Annually from All Nonprofit Organization Borrowers
Required Data and Definition
Information
Unadjusted EBIDA Earnings before interest expense, depreciation expense and amortization expense.
The starting point is net income.
Adjusted EBIDA Unadjusted EBIDA adjusted for any non-recurring, one-time or irregular items. The
Adjusted EBIDA measurement should align with the relevant facility term sheet.
Description of EBIDA Description of items that are added to Unadjusted EBIDA to determine Adjusted
Adjustments EBIDA.
Operating Cash Flow Operating income before non-cash expenses (operating income plus depreciation and
amortization).
Depreciation Expense Non-cash expense measured based on the use of fixed assets, recognized over the
useful life of the fixed assets.
Amortization Expense Non-cash expense measured based on the use of intangible assets, recognized over
the life of the intangible asset.
Interest Expense The periodic finance expense of short term and long term debt.
Total Expenses All money spent and costs incurred, both recurring and non-recurring, to generate
revenue. Expenses exclude items capital in nature (i.e., expenses that are allowed to
be capitalized and included in the cost basis of a fixed asset).
Operating Expenses Money spent and costs incurred related to normal business operations include
selling, general & administrative expenses, depreciation, and amortization (i.e. total
expenses less non-recurring expenses) - excludes capital expenditures and interest
expense.
Operating Income Profit (or loss) realized from continuing operations (i.e. unrestricted revenue less
operating expenses).
Capitalized Expenditures Non-operating expenditures capitalized to fixed assets.
Guarantor Net Assets Total assets less total liabilities of the guarantor (also referred to as net worth).
Sr. Debt Balance Debt amount ranking senior to the Main Street loan.
Additional Pari Passu Debt amount ranking pari passu to the Main Street loan.
Debt Balance
Collateral Type (Non-Real If the loan is secured by collateral that is not predominantly real estate, including if
Estate) the collateral provided is different types, report the predominant type of collateral
(e.g., inventory, receivables, securities, etc.) by aggregate value.
Collateral Type (Real If the loan is secured by real estate collateral, indicate the property type (e.g., hotel,
Estate) multifamily, residential, industrial, etc.). If the loan is secured by multiple real estate
property types, report the predominant property type by aggregate value.
Collateral Value For loans that require ongoing or periodic valuation of the collateral, report the
Reporting market value of the collateral as of the reporting date.
Collateral Value Date Define the as-of date that corresponds with the Collateral Value Reporting field.
Covenant Status (Pass / Yes/no, indicating if the facility has satisfied covenant tests.
Fail)
Date of Covenant Default If applicable, report the date when borrower defaulted covenants.
Nature of Covenant If applicable, describe the covenant default (i.e., missing financial statements, ratio
Default trigger).
Date of Covenant Cure If applicable, report the date when borrower cured previous defaults.
81
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
Table II: Data Required Quarterly from Nonprofit Organization Borrowers by Nonprofit Facility
Required Data and NOELF NONLF Definition
Information
Total Assets Yes No The sum of current assets, fixed assets, and other non-current assets
(including, but not limited to, intangible assets, deferred items,
investments, and advances).
Current Assets Yes No Cash, accounts receivable, inventory, and other short term assets that
are likely to be converted into cash, used, sold, exchanged, or otherwise
expensed in the normal course of business within one year.
Total Cash & Yes Yes All cash & investments - both restricted and unrestricted.
Investments
Unrestricted Cash Yes Yes The portion of cash and investments that are not restricted for any
& Investments reason including by donor-imposed stipulations. If applicable, this
includes Cash and investments (at the borrower and affiliated
foundations) plus funds held in trust by others plus pledges receivable
reported in permanently restricted net assets, less permanently
restricted net assets.
Gross Revenue Yes Yes Total income generated from Medicare and Medicaid, including
from Medicare & Medicare and Medicaid managed care plans (if applicable).
Medicaid
Total Liabilities Yes No The total amount of all outstanding obligations, both current and
noncurrent.
Current Liabilities Yes No Short term debt, accounts payable, and other current liabilities that are
due within one year.
Total Debt (Incl. Yes Yes Existing outstanding and committed debt (including any undrawn
Undrawn Available available amounts, unfunded pension liabilities, operating leases and
Lines of Credit) guaranteed portions of off-balance sheet debt).
Total Revenue Yes Yes Total income generated excluding any non-recurring items.
Net Income Yes No The income (or loss) after expenses and losses have been subtracted
from all revenues and gains for the fiscal period, including discontinued
operations.
Unadjusted EBIDA Yes No Earnings before interest expense, depreciation expense and
amortization expense. The starting point is net income.
Adjusted EBIDA Yes Yes Unadjusted EBIDA adjusted for any non-recurring, one-time or irregular
items. The Adjusted EBIDA measurement should align with the relevant
facility term sheet.
Description of Yes No Description of items that are added to Unadjusted EBIDA to determine
EBIDA Adjustments Adjusted EBIDA.
Operating Cash Yes Yes Operating income before non-cash expenses (operating income plus
Flow depreciation and amortization).
Depreciation Yes No Non-cash expense measured based on the use of fixed assets,
Expense recognized over the useful life of the fixed assets.
Amortization Yes No Non-cash expense measured based on the use of intangible assets,
Expense recognized over the life of the intangible asset.
82
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
Table II: Data Required Quarterly from Nonprofit Organization Borrowers by Nonprofit Facility
Required Data and NOELF NONLF Definition
Information
Interest Expense Yes Yes The periodic finance expense of short term and long term debt.
Description of Yes No Description of items that are added to Unadjusted EBITDA to determine
EBITDA Adjusted EBITDA.
Adjustments
Total Expenses Yes No All money spent and costs incurred, both recurring and non-recurring, to
generate revenue. Expenses exclude items capital in nature (i.e.,
expenses that are allowed to be capitalized and included in the cost
basis of a fixed asset).
Operating Yes Yes Money spent and costs incurred related to normal business operations
Expenses include selling, general & administrative expenses, depreciation, and
amortization (i.e. total expenses less non-recurring expenses) - excludes
capital expenditures and interest expense.
Operating Income Yes Yes Profit (or loss) realized from continuing operations (i.e. unrestricted
revenue less operating expenses).
Capitalized Yes Yes Non-operating expenditures capitalized to fixed assets.
Expenditures
Guarantor Net Yes No Total assets less total liabilities of the guarantor (also referred to as net
Assets worth).
Sr. Debt Balance Yes Yes Debt amount ranking senior to the Main Street loan.
Additional Pari Yes Yes Debt amount ranking pari passu to the Main Street loan.
Passu Debt
Balance
Collateral Type Yes No If the loan is secured by collateral that is not predominantly real estate,
(Non-Real Estate) including if the collateral provided is different types, report the
predominant type of collateral (e.g., inventory, receivables, securities,
etc.) by aggregate value.
Collateral Type Yes No If the loan is secured by real estate collateral, indicate the property type
(Real Estate) (e.g., hotel, multifamily, residential, industrial, etc.). If the loan is
secured by multiple real estate property types, report the predominant
property type by aggregate value.
Collateral Value Yes No For loans that require ongoing or periodic valuation of the collateral,
Reporting report the market value of the collateral as of the reporting date.
Collateral Value Yes No Define the as-of date that corresponds with the Collateral Value
Date Reporting field.
Covenant Status Yes Yes Yes/no, indicating if the facility has satisfied covenant tests.
(Pass / Fail)
Date of Covenant Yes Yes If applicable, report the date when borrower defaulted covenants.
Default
Nature of Yes Yes If applicable, describe the covenant default (i.e., missing financial
Covenant Default statements, ratio trigger).
83
This document was issued on August 6, 2020 and was replaced with a new version on
August 24, 2020. It is no longer effective.
FAQs in this document have been updated, see: https://www.bostonfed.org/-
/media/Documents/special-lending-facilities/mslp/legal/frequently-asked-questions-faqs-nonprofit.pdf
Table II: Data Required Quarterly from Nonprofit Organization Borrowers by Nonprofit Facility
Required Data and NOELF NONLF Definition
Information
Date of Covenant Yes Yes If applicable, report the date when borrower cured previous defaults.
Cure
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