This morning the Treasury began implementing the Main Street Lending Program for mid-sized companies. In another section of the CARES Act, the Main Street Lending Program, there will be $600 billion in new funds made available to borrowers.

The original Act intended lending be made available to borrowers with employee sizes 500-10,000. Today’s information sheet eliminates the minimum employee size standard, now making loans available to all borrowers. Essential terms of the loans indicate:

  1. It will be a recourse loan to the borrower
  2. It will have a 4 year maturity
  3. Principal and interest payments will be deferred for one year
  4. Interest rate will be at market and will float
  5. Minimum loan size = $1mm; maximum loan is the lesser of $25mm or 4x EBITDA for all outstanding debt, inclusive of this borrowing and undrawn credit on existing facilities
  6. Lenders are telling us that this will be a more traditional underwriting process than the PPP. They are coming up to speed on the program and will update as they learn more
  7. There will be restrictions on businesses that take these loans down, including:
    1. Stock dividends or buybacks will not be permitted for one year after the term of the loan
  8. The borrower makes a good faith representation that 90 percent of its workplace on February 1, 2020 will be restored until September 30, 2020
  9. All employee compensation and benefits to retained employees will be restored within four months of the end of the COVID-19 emergency
  10. The borrower will not outsource or offshore jobs for the term of the loan and for two years after the term of the loan
  11. Not abrogate collective bargaining arrangements in place for the term of the loan and for two years afterwards
  12. Remain neutral in any union organizing efforts for the duration of the loan
  13. There are other restrictions that will be described in detail in more information to come shortly

This is an important resource to companies that have maxed out funding under the PPP and still require liquidity to continue operations.

We are analyzing this and will have additional updates.

Please reach out to our COVID-19 Response Team with any questions you might have.

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David Horwich

David Horwich has worked as an investment banker and advisor to both public and privately held businesses for over 30 years. David provides his clients with a focused, integrative and transparent approach. David has advised clients in all facets of transactional activity, including raising capital…Learn More