The Main Street program is not like the SBA`s PPP, where small business applicants who meet the basic eligibility criteria are processed by banks without much additional case-by-case review by the lender. In the Main Street program, simply meeting the Federal Reserve`s eligibility criteria as an eligible borrower does not allow an applicant to be approved or receive the maximum amount of credit allowed. The final decision on whether or not to grant a loan to the applicant rests with the lender. The Fed notes that «the Main Street SPV will make economically reasonable decisions to protect taxpayers from losses from Main Street loans, and will not be affected by non-economic factors in the exercise of its voting rights. [5] While the economic interests of the Main Street VPS and the eligible lender in general should be aligned, we anticipate that: the Decisions of the Main Street VPS regarding the Fundamental Rights Act will not always result in the outcome preferred by eligible lenders. For example, the eligible lender may be less reluctant than the Main Street VP to defer payment or write off part of the loan as part of a job. We also expect that an eligible lender with different exposure to the eligible borrower or its affiliates may assess its overall economic relationship with these companies differently from main street SPV or another government acquirer. Following an increase, the voting rights of the Main Street VPS will be governed by: (i) for Main Street bilateral loans, the co-lender agreement, and (ii) for Main Street multi-lender loans or «extended» facilities, the underlying loan documents. Under the Co-Custody Agreement, amendments and waivers require the consent of the «required lenders»[6], unless such amendments or waivers relate to acts (or omissions) involving «fundamental rights laws», in which case the consent of all relevant lenders or lenders is required. Note that since the Main Street VPS or its assignees will hold 95% of the Main Street loan after the increase, they will have control over all acts (or omissions) that require the consent of the required lenders, leaving the eligible lender in a minority position with no blocking rights, except in matters that involve fundamental rights laws or otherwise require the voice of the relevant lender. This may not be the expected outcome for eligible lenders, as «club» transactions sometimes require the approval of at least two unaffiliated lenders when the required lenders` consent is required. With respect to Main Street`s multi-lender facilities (particularly «extended» loans), the voting rights of the Main Street SPV are guided by the provisions of the underlying loan documents, so we expect these rights to be in line with market standards.
The Main Street Loan Program is a key component of the federal government`s response to the economic impact of the COVID-19 pandemic. The program, implemented and largely funded by the Federal Reserve, is expected to enable hundreds of billions of dollars in low-interest loans for a variety of businesses. The Federal Reserve is not permitted to use its emergency lending power under Section 13(3) to lend to «insolvent» parties. Each Borrower in the Main Street Program is generally required to confirm that they are not bankrupt or in certain other bankruptcy proceedings, and that they generally did not fail to settle undisputed debts when they matured within 90 days prior to the Main Street loan (unless this failure was due to certain government actions related to the COVID-19 pandemic). If the loan of the priority facility is secured by the same collateral as any of the other loans or debt instruments of the eligible borrower, the lien on the collaterals that secure the loan of the priority facility shall prevail over the privileges of other creditors over those collateral. The loan under the Priority Facility does not need to be involved in all guarantees that guarantee the beneficiary`s other loans or debt instruments. Parties considering the Main Street program should expect their participation to become public. The Federal Reserve said it would release information about participation in the Main Street program, including the names of lenders and borrowers, amounts borrowed, interest rates charged and total costs, revenues and fees. In addition, the CARES Act gives Congress significant oversight power and establishes various oversight and investigative bodies regarding stimulus programs funded under these programs, including the Main Street program. .