COVID

• Hogan Lovells article
• PMCCF term sheet
• PMCCF FAQs 
• PMCCF Certification Forms and Documents

• Cannot also participate in MSLP.

• U.S. business with significant operations and a majority of its employees based in U.S. 
  • If the issuer is not a subsidiary whose sole purpose is to issue debt, it must, on a consolidated basis together with its consolidated subsidiaries, have significant operations and a majority of its employees in the U.S.
  • If the issuer is a subsidiary whose sole purpose is to issue debt, any corporate affiliate of the issuer to which 95% or more of the proceeds from the issuance are transferred for use in its operations must have significant operations and a majority of its employees in the U.S. on a consolidated basis.
  • U.S. subsidiaries of foreign businesses can qualify, so long as proceeds are only used for the benefit of the U.S. subsidiary and its U.S. subsidiaries and affiliates, and not its foreign affiliates. 
  • Examples of Significant Operations: greater than 50% of consolidated assets in, annual consolidated net income generated in, annual consolidated net operating revenues generated in, or annual consolidated operating expenses (excluding interest expense and any other expenses associated with debt service) generated in, the United States, as reflected in the borrower's most recent audited financial statements.
• Rated BBB-/Baa3 as of March 22, 2020 by a major nationally recognized statistical rating organization.  If subsequently downgraded, must be at least BB-/Ba3 as of the date on which the PMCCF makes a purchase.
• Cannot be an insured depository institution, a depository institution holding company, or a subsidiary of a depository institution holding company.
• Cannot have received specific support pursuant to the CARES Act or subsequent federal legislation.
  • In this context, specific support is limited to support pursuant to CARES Act Section 4003(b)(1)-(3) (i.e., support for air carriers, cargo carriers, and businesses critical to maintaining national security). 

• Eligibility certifications based on program requirements (i.e., no participation in MSLP; issuer is not a depository institution or depository institution holding company (or a subsidiary thereof), etc.).
• A certification that the issuer is unable to secure adequate credit accommodations from other banking institutions and the capital markets. This certification does not requiring showing that no other credit is available, but instead that the available credit is at prices or on conditions that are inconsistent with a normal, well-functioning market.
• A certification that the issuer is not insolvent.
• A certification that the issuer has not received specific support pursuant to the CARES Act, as described above.
• Certifications covering compliance with the CARES Act U.S. business requirements and conflict of interest requirements and a related verification mechanism for each.

• Hogan Lovells article
• MSNLF term sheet
• MSPLF term sheet
• MSELF term sheet
• MSLP FAQs
• MSLP Certifications

• An affiliated group of companies can only participate in one of MSNLF, MSPLF or MSELF.
• Neither the borrower, nor any of its affiliates, can participate in the PMCCF.
• Can also participate in PPP.

• U.S. business with significant operations and a majority of employees in the U.S.
  • U.S. subsidiaries of foreign businesses can qualify, so long as proceeds are only used for the benefit of the U.S. subsidiary and its U.S. subsidiaries and affiliates, and not its foreign affiliates.
  • Examples of Significant Operations: greater than 50% of consolidated assets in, annual consolidated net income generated in, annual consolidated net operating revenues generated in, or annual consolidated operating expenses (excluding interest expense and any other expenses associated with debt service) generated in, the U.S.
• Borrower must have either (i) fewer than 15,000 employees or (ii) equal to or less than US$5.0 billion in 2019 revenue.
  • Borrowers must count the employees and revenues of their affiliates when determining number of employees/amount of revenues using same affiliation rules as used in PPP.
• If the borrower is a holding company, it must designate operating subsidiaries to fully guarantee the loan on a joint and several basis, each of which must also be an eligible borrower.
• Cannot have received specific support pursuant to the CARES Act (does not preclude prior PPP participation).
  • In this context, specific support is limited to support pursuant to CARES Act Section 4003(b)(1)-(3) (i.e., support for air carriers, cargo carriers, and businesses critical to maintaining national security).
• Any loan the borrower had with the eligible lender as of December 31, 2019 must have had an internal risk rating of "pass" as of that date. 
• If a business has an existing debt arrangement that requires prepayment of more than a de minimis amount upon the incurrence of new debt, the business cannot borrower under the MSNLF or MSELF unless the requirement is waived or reduced to a de minimis amount.

• Detailed eligibility certifications,
• Detailed certifications related to the program's requirements (i.e., security/subordination, etc.)
• A solvency certification. A borrower will not be deemed insolvent by virtue of failing to pay its debts as they come due if it is behind on payments because of reduced business activity resulting from stay-at-home or other governmental orders related to COVID-19 or if routine funding sources were unavailable as a result of COVID-19.
• Borrower has reasonable basis to believe that as of origination and after giving effect to the loan, it has the ability to meet its financial obligations for at least the next 90 days and does not expect to file for bankruptcy in that period.
• Borrower will not:
  • repay other debt, excluding mandatory and due payments, until loan is repaid in full or neither the Main Street SPV nor a governmental assignee holds an interest in the loan, except that borrowers under MSPLF can refinance existing debt owed to lenders other than the MSPLF lender at the time of origination; or
  • cancel or reduce outstanding lines of credit.
• Borrower will comply with all CARES Act direct loan program requirements, including:
  • no stock repurchases for 12 months;
  • no dividends for 12 months, except that tax distributions for S-corps and other pass-through entities are permitted; and
  • adhering to compensation limitations for certain highly compensated employees.
• Borrower is unable to secure adequate credit accommodations from other banking institutions.
  • This does not require showing that no credit is available, rather the borrower may certify that 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.

In addition to the foregoing certifications and covenants, the borrower must use commercially reasonable efforts to maintain payroll and retain employees during the term of the loan.

• Hogan Lovells article
• PPP application
• PPP FAQs
• Program Rules

• Dollar-for-dollar forgiveness of loan amounts used for (i) payroll costs, (ii) interest on mortgage payments (iii) rent, and (iv) utilities, in each case during the 24-week period after the date of loan origination.  No more than 40% of the forgiven amount can apply to amounts other than payroll costs.
  • If a borrower received a PPP loan prior to June 5, 2020, it can instead elect to have the original 8-week covered period apply.
• Amount forgiven is subject to reduction if borrower reduces (i) workforce or (ii) worker salaries in excess of 25%. 
  • Reduction can be cured if rehired or wage reduction eliminated by December 31, 2020 (only applies to workers laid off or with salaries reduced prior to April 26, 2020).
  • If the borrower offers to rehire a previously laid off employee in good faith and in writing, and the employee rejects the offer, the borrower's forgiveness amount will not be reduced in respect of such employee.
  • Borrowers will not be penalized for employees that are fired for cause, voluntarily resign or voluntarily request a schedule reduction during the covered period.
  • Forgiveness is determined without regard to a reduction in employees if the borrower documents (i) its inability to (A) rehire the same employees and (B) hire similarly qualified employees for unfilled positions on or before December 31 or (ii) its inability to return to the same level of business activity as before February 15, 2020 due to its compliance with federal safety requirements or guidance related to COVID-19.
• Lenders will provide SBA with a forgiveness decision within 60 days of receipt of the forgiveness application, SBA will review and remit the applicable forgiveness amount within 90 days therafter.

• U.S. business that is (i) a small business concern that meets SBA’s size standards or (ii) any business concern, nonprofit, veterans organization, or tribal business that employs not more than the greater of (a) 500 employees or (b) the standard number of employees established by the SBA for the applicable industry. Businesses may also qualify by meeting the “alternative size standard”: (i) a net worth of US$15 million or less and (ii) average net income (after federal income taxes) of US$5 million or less.
• Affiliation rules:  Generally, (i) ownership of more than 50% of an entity or (ii) minority ownership with the ability to block operational actions (e.g., budget adoption, employment decisions, etc.) create an affiliate relationship between a business and its owner.  If two entities are affiliated, their employees and revenue are aggregated for determining PPP eligibility. The aggregation of employees and revenues applies to both U.S. and foreign affiliates of a business.
  • A business will not be penalized for failing to include foreign employees of affiliates if it applied for a loan prior to May 5, 2020, and otherwise (together with its affiliates) had less than 500 U.S. employees.
• Affiliation exemptions:  The affiliation rules do not apply to businesses (i) assigned a NAICS code beginning with 72 (generally, hospitality and food services businesses), (ii) operating a franchise, or (iii) receiving financial assistance from an SBIC.
• Per location test:  Businesses with NAICS codes beginning with 72 with no more than 500 employees per physical location are automatically eligible.

• Business must certify in good faith that "[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant." Businesses must make this certification taking into account their current activity and ability to access other sources of liquidity sufficient to support their operations in a manner that is not significantly detrimental to the business.
  • Through subsequent guidance, SBA indicated heightened scrutiny will be given to this certification, and, for example, a public company with substantial market value and access to capital markets is not likely able to make this certification.
  • Accordingly, public companies and their subsidiaries, large private companies, and any public and private businesses owned by large companies, in each case irrespective of whether an affiliation exemption applies, should carefully consider (or reconsider) whether they are positioned to make this certification.
• Need-Based Certification and Safe Harbor:
  • Any business that applied for a loan before April 23, 2020 and repaid the loan by May 18, 2020, will be deemed to have made the need-based certification in good faith (i.e., will not be penalized in respect of such certification). If the loan was timely repaid, the business is still eligible for the employee retention credit under the CARES Act.
  • Any business that, together with its affiliates, obtained a PPP loan of less than $2 million will be automatically deemed to have made the required need-based certification in good faith.
  • For businesses that obtained a PPP loan in excess of $2 million, if through audit SBA determines the business did not have an adequate basis to make this certification, SBA will request the loan be repaid and will inform the lender that the business is not eligible for forgiveness. If repaid, SBA will not pursue enforcement action in connection with such certification.
• Loan proceeds must be used by December 31, 2020 for only the following permitted uses:  (i) payroll costs, (ii) interest on mortgage payments, (iii) rent, (iv) utilities, (v) interest payments on other debt, or (vi) refinancing an EIDL.
  • As well, at least 60% of the loan proceeds must be used for payroll costs, regardless of forgiveness.
• Business and certifying party subject to liability for knowing misuse of proceeds (e.g., fraud).